[Federal Register Volume 78, Number 169 (Friday, August 30, 2013)]
[Rules and Regulations]
[Pages 54069-54146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21338]



[[Page 54069]]

Vol. 78

Friday,

No. 169

August 30, 2013

Part VI





Department of Health and Human Services





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45 CFR Parts 147, 153, 155, et al.





 Patient Protection and Affordable Care Act; Program Integrity: 
Exchange, SHOP, and Eligibility Appeals; Final Rule

Federal Register / Vol. 78, No. 169 / Friday, August 30, 2013 / Rules 
and Regulations

[[Page 54070]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 153, 155, and 156

[CMS-9957-F]
RIN 0938-AR82


Patient Protection and Affordable Care Act; Program Integrity: 
Exchange, SHOP, and Eligibility Appeals

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

ACTION: Final rule.

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SUMMARY: This final rule implements provisions of the Patient 
Protection and Affordable Care Act and the Health Care and Education 
Reconciliation Act of 2010 (collectively referred to as the Affordable 
Care Act). Specifically, this final rule outlines Exchange standards 
with respect to eligibility appeals, agents and brokers, privacy and 
security, issuer direct enrollment, and the handling of consumer cases. 
It also sets forth standards with respect to a State's operation of the 
Exchange and Small Business Health Options Program (SHOP). It generally 
is finalizing previously proposed policies without change.

DATES: These regulations are effective on September 30, 2013.

FOR FURTHER INFORMATION CONTACT: Leigha Basini at (301) 492-4380, or 
Noah Isserman at (301) 492-4401 for general information and matters 
relating to parts 155 and 156.
    Seth Schneer at (301) 492-4405 for matters relating to the SHOP.
    Jacob Ackerman at (301) 492-4179 for matters relating to part 147.
    Jaya Ghildiyal at (301) 492-5149 for matters relating to part 153.
    Christine Hammer at (301) 492-4431 for matters relating to part 155 
subpart F.
    Paul Tibbits at (301) 492-4229 for matters relating to part 156, 
subpart K.

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.

Acronyms and Short Forms

    Because of the many organizations and terms to which we refer by 
acronym in this proposed rule, we are listing these acronyms and their 
corresponding terms in alphabetical order below:
Affordable Care Act The Affordable Care Act (which is 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
CFR Code of Federal Regulations
CHIP Children's Health Insurance Program
CMP Civil Money Penalty
CMS Centers for Medicare & Medicaid Services
DOI State Department of Insurance
DOL U.S. Department of Labor
EFT Electronic Funds Transfer
EHB Essential Health Benefits
FEHB Federal Employees Health Benefits
FFE Federally-facilitated Exchange
FFE API Federally-facilitated Exchange Application Programming 
Interface
FF-SHOP Federally-Facilitated Small Business Health Options Program
GAO United States Government Accountability Office
GLBA Gramm Leach Bliley Act
HHS U.S. Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191, as amended) and its implementing regulations
IRS Internal Revenue Service
LEP Limited English Proficiency
MAGI Modified Adjusted Gross Income
MLR Medical Loss Ratio
NAIC National Association of Insurance Commissioners
NPRM Notice of Proposed Rulemaking
OMB Office of Management and Budget
PCIP Pre-existing Condition Insurance Plan
PHI Protected Health Information
PHS Act Public Health Service Act
PII Personally Identifiable Information
PRA Paperwork Reduction Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986
TIN Taxpayer Identification Number

Executive Summary

    Starting on January 1, 2014, qualified individuals and qualified 
employees will be able to be covered by private health insurance 
coverage through competitive marketplaces called Affordable Insurance 
Exchanges, or ``Exchanges'' (also called Health Insurance 
Marketplaces). This rule sets forth standards for eligibility appeals, 
verification of eligibility for minimum essential coverage, and 
treatment of incomplete applications. It also establishes additional 
consumer protections regarding privacy and security; clarifies the role 
of agents, brokers, and issuer application assisters in assisting 
consumers with obtaining Exchange coverage; provides for the handling 
consumer cases; and establishes non-discrimination standards for 
methods of premium payment. Finally, it sets forth provisions regarding 
a State's operation of the SHOP.
    Although many of the provisions in this rule will become effective 
by October 1, 2013, we do not believe that affected parties will have 
difficulty complying with the provisions by their effective dates, 
because the standards are based on existing standards currently in 
effect in the private health insurance market, were previously 
addressed in the Exchange Blueprint process, discussed in agency-issued 
sub-regulatory guidance, or discussed in the preambles to the Exchange 
Establishment Rule,\1\ Premium Stabilization Rule,\2\ or the HHS Notice 
of Benefit and Payment Parameters for 2014.\3\ In addition to comments 
on the substance of the provisions we are now finalizing, we sought 
input on ways to implement the proposed policies to minimize burden.
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    \1\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for 
Employers, 77 FR 18310 (March 27, 2012).
    \2\ Patient Protection and Affordable Care Act; Standards 
Related to Reinsurance, Risk Corridors and Risk Adjustment, 77 FR 
17220 (March 23, 2012).
    \3\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2014 and Amendments to the HHS 
Notice of Benefit and Payment Parameters for 2014, 78 FR 15410 and 
15541 (Mar. 11, 2013).
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Table of Contents

I. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
II. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments
    A. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    1. Fair Health Insurance Premiums
    B. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    1. Subpart F-- Health Insurance Issuer Standards Related to the 
Risk Corridors Program
    C. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart A--General Provisions
    2. Subpart B--General Standards Related to the Establishment of 
an Exchange
    3. Subpart C--General Functions of an Exchange
    4. Subpart D--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    5. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    6. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs

[[Page 54071]]

    7. Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)
    D. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart A--General Provisions
    2. Subpart C--Qualified Health Plan Minimum Certification 
Standards
    3. Subpart D--Federally-facilitated Exchange Qualified Health 
Plan Issuer Standards
    4. Subpart I--Enforcement Remedies in Federally-facilitated 
Exchanges
    5. Subpart K--Cases Forwarded to Qualified Health Plans and 
Qualified Health Plan Issuers in Federally-facilitated Exchanges by 
HHS
    6. Subpart M--Qualified Health Plan Issuer Responsibilities
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
V. Regulations text

I. Background

A. Legislative Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the Patient Protection and Affordable Care Act, 
was enacted on March 30, 2010. In this final rule, we refer to the two 
statutes collectively as the ``Affordable Care Act.''
    Subtitles A and C of Title I of the Affordable Care Act 
reorganized, amended, and added to the provisions of Title XXVII of the 
Public Health Service Act (PHS Act) relating to health insurance 
issuers in the group and individual markets and to group health plans 
that are non-Federal governmental plans. As relevant here, section 2701 
of the PHS Act (fair health insurance premiums) provides that the 
premium rate charged by a health insurance issuer for non-grandfathered 
health insurance coverage in the individual or small group market may 
vary with respect to a particular plan or coverage only based on family 
size, rating area, age (within a ratio of 3:1 for adults), and tobacco 
use (within a ratio of 1.5:1).
    Starting on October 1, 2013 for coverage starting as soon as 
January 1, 2014, qualified individuals and qualified employers will be 
able to enroll in qualified health plans (QHPs)--private health 
insurance that has been certified as meeting certain standards--through 
competitive marketplaces called Exchanges or Health Insurance 
Marketplaces. The Departments of Health and Human Services, Labor, and 
the Treasury have been working in close coordination to release 
guidance related to QHPs and Exchanges in several phases. The word 
``Exchanges'' refers to both State Exchanges, also called State-based 
Exchanges, and Federally-facilitated Exchanges (FFEs). In this final 
rule, we use the terms ``State Exchange'' or ``FFE'' when we are 
referring to a particular type of Exchange. When we refer to ``FFEs,'' 
we are also referring to State Partnership Exchanges, which are a form 
of FFE.
    In the proposed rule, we encouraged State flexibility. Sections 
1311(b) and 1321(b) of the Affordable Care Act provide that each State 
has the opportunity to establish an Exchange. Section 1311(b)(1) gives 
each State the opportunity to establish an Exchange that both 
facilitates the purchase of QHPs and provides for the establishment of 
a Small Business Health Options Program (SHOP) that will help qualified 
employers enroll their qualified employees in QHPs. Section 1311(b)(2) 
contemplates the separate operation of the individual market Exchange 
and the SHOP under different governance and administrative structures, 
permitting the individual market Exchange and SHOP to be merged if 
States have adequate resources to assist both populations (individual 
and small employers).
    Section 1321(a) of the Affordable Care Act provides general 
authority for the Secretary of Health and Human Services (referred to 
throughout this rule as the Secretary) to establish standards and 
regulations to implement the statutory requirements related to 
Exchanges, QHPs, and other components of Title I of the Affordable Care 
Act.
    Section 1321(c)(1) requires the Secretary to establish and operate 
an FFE within States that either: do not elect to establish an Exchange 
or, as determined by the Secretary, will not have any required Exchange 
operational by January 1, 2014.
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce the Exchange standards using civil money penalties 
(CMPs) on the same basis as detailed in section 2723(b) of the PHS 
Act.\4\ 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 Title XXVII, Part A of the PHS Act when a State 
fails to substantially enforce these provisions, as determined by the 
Secretary.
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    \4\ 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 1311(d)(4)(A) of the Affordable Care Act directs that each 
Exchange must implement procedures for the certification, 
recertification, and decertification of health plans as QHPs, 
consistent with guidelines developed by the Secretary.
    Section 1312(c) of the Affordable Care Act directs a health 
insurance issuer to consider all enrollees in all health plans (other 
than grandfathered health plans) offered by such issuer to be members 
of a single risk pool for each of its individual and small group 
markets. Section 1312(c) of the Affordable Care Act also gives States 
the option to merge the individual and small group markets within the 
State into a single risk pool.
    Section 1312(e) of the Affordable Care Act directs the Secretary to 
establish procedures under which a State may permit agents and brokers 
to enroll qualified individuals and qualified employers in QHPs through 
an Exchange, and to assist individuals in applying for advance payments 
of the premium tax credit and cost-sharing reductions.
    Section 1313 of the Affordable Care Act, combined with section 1321 
of the Affordable Care Act, provides the Secretary with the authority 
to oversee the financial integrity, compliance with HHS standards, and 
efficient and non-discriminatory administration of State Exchange 
activities. Section 1313(a)(6)(A) of the Affordable Care Act specifies 
that payments made by, through, or in connection with an Exchange are 
subject to the False Claims Act (31 U.S.C. 3729, et seq.) if those 
payments include any Federal funds.
    Under section 1411 of the Affordable Care Act, the Secretary is 
directed to establish a program for determining whether an individual 
meets the eligibility standards for Exchange participation, advance 
payments of the premium tax credit, cost-sharing reductions, and 
exemptions from the shared responsibility payment under section 5000A 
of the Code.
    Section 1411(g) of the Affordable Care Act specifies that 
information provided by an applicant or received from a Federal agency 
may be used only for the purpose of, and to the extent necessary in, 
ensuring the efficient operation of the Exchange, including for the 
purpose of verifying the eligibility of an individual to enroll through 
an Exchange, to claim a premium tax credit or cost-sharing reduction, 
or for verifying the amount of the tax credit or reduction.
    Section 1411(h) of the Affordable Care Act sets forth civil 
penalties that any person may be subject to if he or she fails to 
provide correct information or

[[Page 54072]]

knowingly and willfully provides false or fraudulent information under 
section 1411(b), or improperly uses or discloses information provided 
by an applicant or another Federal agency under section 1411(b), (c), 
(d), or (e).
    Sections 1412 and 1413 of the Affordable Care Act and section 1943 
of the Social Security Act (the Act), as added by section 2201 of the 
Affordable Care Act, contain additional provisions regarding 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, as well as provisions regarding simplification and 
coordination of eligibility determinations and enrollment with other 
health programs.
    Unless otherwise specified, the provisions in this final rule 
related to the establishment of minimum functions of an Exchange are 
based on the general authority of Secretary under section 1321(a)(1) of 
the Affordable Care Act.

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on a number of polices related 
to the operation of Exchanges, including the SHOP, and premium 
stabilization programs. HHS has held a number of listening sessions 
with consumers, providers, employers, health plans, and State 
representatives to gather public input. HHS consulted with stakeholders 
through regular meetings with the National Association of Insurance 
Commissioners (NAIC); regular contact with States through the Exchange 
establishment grant process and the Exchange Blueprint approval 
process; and meetings with tribal leaders and representatives, health 
insurance issuers, trade groups, consumer advocates, employers, and 
other interested parties. We considered all of the public input as we 
developed the policies in the proposed rule and this final rule.

II. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

    A proposed rule, titled ``Patient Protection and Affordable Care 
Act; Program Integrity: Exchange, SHOP, Premium Stabilization Programs, 
and Market Standards'' (78 FR 37032), was published in the Federal 
Register on June 19, 2013 with a comment period ending on July 19, 
2013. In total, we received 99 public comments on the proposed rule 
from various stakeholders, including States, health insurance issuers, 
consumer groups, agents and brokers, provider groups, Members of 
Congress, Tribal organizations, and other stakeholders. Of the comments 
received, about 22 were substantially identical submissions related to 
non-discrimination standards, Web-brokers, incomplete applications, and 
payment method non-discrimination standards for the unbanked. We 
received a few comments that were outside the scope of the proposed 
rule. In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing. We are not finalizing all 
the provisions from this proposed rule. This final rule includes those 
provisions that need to be effective for the beginning of open 
enrollment on October 1, 2013. We will finalize the other provisions at 
a later date.
    Another proposed rule, entitled ``Essential Health Benefits in 
Alternative Benefit Plans, Eligibility Notices, Fair Hearing, and 
Appeal Processes for Medicaid and Exchange Eligibility Appeals and 
Other Provisions Related to Eligibility and Enrollment for Exchanges, 
Medicaid and CHIP, and Medicaid Premiums and Cost Sharing'' (78 FR 
4594), was published in the Federal Register on January 22, 2013 with a 
comment period ending on February 13, 2013. We received a total of 741 
comments from various stakeholders including individuals, State 
Medicaid agencies, advocacy groups, and Tribal organizations. In this 
final rule, we are only addressing from that proposed rule the 
provisions related to appeals in Part 155 Subpart F and Sec.  155.740. 
Other provisions from the January 22, 2013 proposed rule were finalized 
in a final rule, titled ``CMS-2234-F: 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 42160) published in the Federal Register on July 15, 2013.

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

1. Fair Health Insurance Premiums (Sec.  147.102)
    We proposed two clarifications in Sec.  147.102, which implements 
section 2701 of PHS Act regarding fair health insurance premiums. In 
paragraph (a), we proposed to add a reference to the single risk pool 
standard codified in Sec.  156.80 to clarify the connection between 
section 1312(c) of the Affordable Care Act and section 2701 of the PHS 
Act with respect to the development of rates and premiums for health 
insurance coverage in the individual and small group markets.
    In paragraph (a)(1)(ii), we proposed to clarify that for rating 
purposes under section 2701 of the PHS Act, the geographic rating area 
is determined in the small group market using the principal business 
address of the group policyholder, and in the individual market using 
the address of the primary policyholder, regardless of the location of 
other individuals covered under the plan or coverage. These proposed 
standards would apply both inside and outside of the Exchanges and are 
consistent with previously released guidance describing our intended 
approach.\5\ We solicited comments on this proposal.
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    \5\ Questions and Answers Related to Health Insurance Market 
Reforms (April 26, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/qa_hmr.html.
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    Comment: While some commenters supported our proposal that issuers 
in the small group market apply rates based on the employer's principal 
business address, other commenters noted that issuers in some States 
have already developed administrative systems and rates for 2014 based 
on guidance from State regulators to use each employee's place of 
residence. These commenters requested that States have flexibility to 
use either employer or employee address when rating for geography.
    Response: We believe it is important that all issuers offering 
coverage within a State, both through the Exchanges and outside of the 
Exchanges, use a consistent geographic rating methodology to promote 
the accuracy of the risk adjustment program established under section 
1343 of the Affordable Care Act. Further, we believe that rating based 
on the employer's principal business address is consistent with current 
prevailing industry practice and will simplify administration of the 
geographic rating factor. We recognize, however, that issuers in some 
cases may have relied in good faith on guidance or instructions from 
States to rate based on employee address for 2014. Thus, while we are 
finalizing our proposed policy that geographic rating be based on the 
employer's principal business address generally for plan years 
beginning on or after January 1, 2014, we are also providing in this 
final rule that where issuers can demonstrate that they have relied in 
good faith on different guidance from a State insurance regulator prior 
to the issuance of this final rule, the amendments to Sec.  
147.102(a)(1)(ii) will not apply until the first plan year beginning on 
or after

[[Page 54073]]

January 1, 2015 with respect to coverage in the small group market. We 
believe this approach promotes consistency in rating, while affording 
issuers in certain circumstances a reasonable period of time to 
transition to the geographic rating methodology in this final rule. We 
note that this flexibility will not apply to plans offered through the 
Federally-facilitated Small Business Health Options Program (FF-SHOP), 
which will apply rates based on the employer's principal business 
addressing beginning in 2014.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  147.102 of the 
proposed rule with the addition of a transition period for issuers in 
certain circumstances.

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

1. Subpart F--Health Insurance Issuer Standards Related to the Risk 
Corridors Program
a. Definitions (Sec.  153.500)
    In the proposed rule, we sought comment on our proposed amendment 
to Sec.  155.20 that for a plan offered outside the Exchange to be 
considered the same plan as one that is certified as a QHP and offered 
through the Exchange, the benefits package, provider network, service 
areas, and cost-sharing structure of the two offerings would have to be 
identical. As discussed below in Part C(1)(a) of this final rule, we 
are finalizing this policy as proposed. In the proposed rule, we also 
proposed that this standard be used to determine which off-Exchange 
plans would be subject to the risk corridors program. As discussed 
below in Part C(1)(a) of this final rule, many commenters suggested 
that, in addition to the plans described in our proposal, plans that 
differ from a QHP offered through the Exchange only as a result of 
Federal or State requirements or prohibitions on the coverage of 
benefits that apply differently to plans depending on whether they are 
offered through or outside an Exchange, should be afforded the 
protection of risk corridors.
    For example, several commenters suggested that a plan offered 
outside the Exchange that differs from a QHP offered through an 
Exchange solely based on inclusion of the required pediatric dental EHB 
should be included in the risk corridors program. Because health 
insurance issuers may sell a QHP without the pediatric dental EHB 
through an Exchange if a stand-alone dental plan that covers the 
pediatric dental EHB is offered on that Exchange, commenters argued 
that plans that differ solely due to coverage of the pediatric dental 
EHB differ only because of a Federal requirement, and that this 
requirement should not prevent the plans from receiving risk corridors 
protections when offered outside the Exchange. Another commenter 
suggested that the network requirements for multi-state plan (MSP) 
issuers set by the Office of Personnel Management (OPM) could conflict 
with comparable State requirements, similarly potentially disqualifying 
plans offered outside the Exchanges that are comparable to MSP options 
from participating in the risk corridors program.
    We agree with these commenters that the risk corridors program 
should also cover plans offered outside the Exchanges that differ from 
a QHP only as a result of Federal or State requirements or prohibitions 
on the coverage of benefits that apply differently to plans depending 
on whether they are offered through or outside the Exchange; therefore, 
we are not finalizing this risk corridors policy as proposed. Rather, 
we are reiterating our policy, previously finalized in the preamble to 
the Premium Stabilization Rule (77 FR 17237), where we stated that 
health plans that are substantially the same as a QHP will be subject 
to the risk corridors program and signaled an intent to clarify this 
standard in future rulemaking. Here, we clarify that a plan offered by 
an issuer outside the Exchange that differs from a QHP offered by the 
issuer through the Exchange only as a result of Federal or State 
requirements or prohibitions on the coverage of benefits that apply 
differently to plans depending on whether they are offered through or 
outside the Exchange, is ``substantially the same'' as the QHP and 
will, therefore, participate in the risk corridors program. To 
effectuate this change, we are amending the definition of ``qualified 
health plan'' at Sec.  153.20 and moving it to Sec.  153.500 to apply 
solely for purposes of the risk corridors program. Here, we are also 
clarifying that, when reading the regulations at 45 CFR part 153, 
subpart F regarding risk corridors, any reference to a ``qualified 
health plan'' or ``QHP'' includes plans that are the ``same'' as a QHP, 
as specified below in Part C(1)(a) of this rule, and plans that are 
``substantially the same'' as a QHP, as specified above. We note that 
changes in service area, and changes in benefits, cost-sharing 
structure, premium, or provider network that are not tied directly and 
exclusively to the Federal or State requirements or prohibitions on the 
coverage of benefits that apply differentially to a plan depending on 
whether it is offered through the Exchange, disqualify the plan offered 
outside the Exchange from participation in the risk corridors program. 
Additionally, we recognize that OPM may issue additional standards for 
MSP issuers in the future (for example, standards related to provider 
networks) that could create situations analogous to the ones we discuss 
above. We will consider whether a plan that differs from a QHP (as 
defined at Sec.  155.20) based on these standards would be considered 
to be ``substantially the same'' as a QHP for purposes of participating 
in the risk corridors program, and may address this topic in future 
rulemaking.
    We intend to issue guidance on the operational aspects of this 
standard, including how HHS and issuers will identify plan submissions 
(including those submitted for the 2014 benefit year) that are 
``substantially the same'' as a QHP offered through an Exchange for the 
purposes of determining whether the plan will participate in the risk 
corridors program. We note that this amendment is limited to the risk 
corridors program, and does not expand the definition of a QHP for 
other purposes, including for purposes of parts 155 and 156.
Summary of Regulatory Changes
    We are adding a definition of ``qualified health plan'' at Sec.  
153.500 to specify which plans will be subject to the risk corridors 
program. We are deleting the definition of ``qualified health plan'' at 
Sec.  153.20.

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

1. Subpart A--General Provisions
a. Definitions (Sec.  155.20)
    We proposed to amend 45 CFR 155.20 to reflect new flexibility 
permitting a State to elect to establish and operate just a SHOP, and 
not both a SHOP and an individual market Exchange, by modifying the 
definition of ``Exchange.''
Exchange
    We proposed to amend the term ``Exchange'' to mean a governmental 
agency or non-profit entity that meets the applicable standards of Part 
155 and makes QHPs available to qualified individuals and/or qualified 
employers. Unless otherwise identified, under the proposed definition 
this term would include an Exchange serving the

[[Page 54074]]

individual market for qualified individuals and a SHOP serving the 
small group market for qualified employers, regardless of whether the 
Exchange is established and operated by a State (including a regional 
Exchange or subsidiary Exchange) or by HHS.
    Although we received no direct comment on this proposed change, we 
received several general comments to the proposed amendments to Sec.  
155.100 in support of permitting a State to elect to establish just a 
SHOP while HHS operates the individual market Exchange. These comments 
are addressed in conjunction with the comments to Sec. Sec.  155.100.
Issuer Application Assister
    We proposed to define a new term, ``issuer customer service 
representative'' to mean an employee, contractor, or agent of a QHP 
issuer that provides assistance to applicants and enrollees, but is not 
licensed as an agent, broker, or producer under State law. However, for 
the same reasons specified in the preamble to Sec.  155.415 below, we 
will use the term ``issuer application assisters'' in place of ``issuer 
customer service representatives'' to more clearly articulate the role 
of such individuals. Moreover, as also specified in the preamble to 
Sec.  155.415 below, we are finalizing a modified definition in this 
section to reflect in more detail the role of issuer application 
assisters as defined in Sec.  155.415.
Qualified Health Plan
    In the proposed rule, we proposed to specify that, for a plan 
offered outside an Exchange to be considered the same plan as one that 
is certified as a QHP and offered through the Exchange, the benefits 
package, provider network, service areas, and cost-sharing structure of 
the two offerings would have to be identical. We noted that nothing in 
that proposal would relieve an issuer of a plan that has been certified 
as a QHP by an Exchange from the requirement to charge the same premium 
for the QHP sold to consumers outside of an Exchange pursuant to 
sections 1301(a)(C)(iii) of the Affordable Care Act and 45 CFR 
156.255(b) and 45 CFR 147.104. We also proposed to clarify that a plan 
sold to consumers outside of an Exchange would only be subject to the 
risk corridors program if it is the same plan as a QHP actually offered 
by that issuer on the Exchange. We requested comment on all aspects of 
this approach.
    In this final rule, we are finalizing the proposed policy regarding 
when a plan is the same plan as a QHP for purposes of the same premium 
requirement. However, as discussed above in Part B(1)(a) of this final 
rule, in response to many of the comments we received on this policy 
with regard to the risk corridors program, we are not finalizing our 
proposed policy that would have required a plan sold to consumers 
outside of an Exchange to be the same plan as a QHP offered through an 
Exchange for purposes of participating in the risk corridors program. 
We further discuss this policy with respect to the risk corridors 
program above in Part B(1)(a) of this final rule.
    Comment: A number of commenters stated that requiring a plan 
offered outside of an Exchange to be identical to a QHP offered through 
an Exchange with respect to the characteristics described above in 
order to be considered the same plan was too restrictive. As discussed 
above in Part B(1)(a) of this final rule, commenters were particularly 
concerned about the effect of such a standard on plans that differ from 
Exchange QHPs solely as a result of Federal and State requirements or 
prohibitions on the coverage of benefits that apply differently to 
plans depending on whether they are offered through or outside the 
Exchange.
    Response: Although we understand the commenters' concern that 
Federal or State requirements or prohibitions on the coverage of 
benefits that apply differently to plans depending on whether they are 
offered through or outside the Exchange could deprive plans offered 
outside the Exchange of the protections of risk corridors, we do not 
believe that this policy concern should result in our considering plans 
that are ``substantially the same'' as a QHP to be the ``same plan'' as 
the QHP.
    In the Premium Stabilization rule (77 FR 17220), we stated that a 
plan offered outside of an Exchange that is ``substantially the same'' 
as a QHP would qualify for the risk corridors program, and stated that 
we might clarify that standard in future guidance. In response to 
comment, in Part B(1)(a) of this final rule we are clarifying which 
plans are ``substantially the same'' as a QHP, and will therefore be 
subject to the risk corridors program.
    We believe that, for plans that are substantially the same as a 
QHP, any variations in benefits and cost-sharing structure that are 
directly tied to Federal or State requirements or prohibitions on the 
coverage of benefits that apply differently to plans depending on 
whether they are offered through or outside the Exchange could affect 
QHP premium rating. Therefore, we are clarifying that a plan offered by 
a QHP issuer outside an Exchange would be the same as a QHP offered by 
that same QHP issuer through the Exchange, only if they are identical 
with respect to benefits, provider network, service area, and cost-
sharing structure, and that, in contrast to our statement in the 
Exchange Establishment rule, only plans that are the same as a QHP 
offered through an Exchange must have the same premium as the QHP 
offered through the Exchange, pursuant to 45 CFR 156.255(b). We also 
note that this definition of what constitutes the same QHP defines 
identical plan offerings based only on the criteria set forth above. 
Accordingly, plan offerings that differ only in other respects (for 
example, plans' appeals processes or plan name) would not be considered 
different plans for purposes of the requirement that the same premiums 
be charged both through and outside the Exchange.
    Comment: A few commenters expressed concern that issuers would have 
already submitted their QHPs to Exchanges for approval for 2014 without 
the benefit of knowing how to align plans offered outside the Exchanges 
with QHPs offered through the Exchanges. They asserted that issuers 
were relying on a ``substantially the same'' standard when they filed 
their rates and designed their plan offerings for the 2014 benefit 
year, and that implementation of the proposed definition in the 2014 
benefit year could have a destabilizing effect on the market. Although 
some commenters recommended that HHS adopt a ``substantially the same'' 
standard for QHPs offered outside the Exchanges for the duration of the 
temporary risk corridors program, others believed that a one-year 
transition period would provide issuers sufficient time to develop 2015 
benefit year offerings that would be eligible for risk corridors. Most 
commenters did not attempt to clarify how they would decide which plans 
were ``substantially the same'' as a QHP; however, one commenter 
suggested that any plan offered outside the Exchange that could qualify 
as a QHP be considered ``substantially the same'' as a QHP.
    Response: In Part B(1)(a) of this final rule, we are revising the 
risk corridors regulations at Part 153 to set forth standards for plans 
offered outside of an Exchange that are ``substantially the same'' as a 
QHP and that will be subject to the risk corridors program. We believe 
that the regulation text we codify in this rule reflects the standard 
set forth in the Premium Stabilization Rule, provides flexibility for 
plans that were relying on an undefined ``substantially the same'' 
standard prior to the 2014 rate filing deadline, and also

[[Page 54075]]

helps to ensure the integrity of the risk corridors program so that it 
is clear, prior to the end of 2014 when data for the risk corridors 
calculation become available, which off-Exchange plans are subject to 
risk corridors, and which off-Exchange plans are not. We note that we 
intend to issue guidance on the operational aspects of this standard, 
including how HHS and issuers will identify plans submissions 
(including those submitted for the 2014 benefit year) that are 
``substantially the same'' as a QHP offered through an Exchange for the 
purposes of determining whether the plan will participate in the risk 
corridors program.
    Comment: In the proposed rule, we indicated our intention to 
clarify that, in order to be the same plan as a QHP, the off-Exchange 
plan must be offered by the same issuer that offers a QHP inside of an 
Exchange. Two commenters stated that requiring plans offered through 
the Exchange and plans offered outside of the Exchange to be offered by 
the same issuer could present significant operational challenges for 
issuers that organize their corporate structures so that Exchange 
offerings are provided by one entity and offerings outside of an 
Exchange are provided by another. One of the commenters was also 
concerned that the requirement could restrict the range of products 
that would be available outside of an Exchange, and recommended that we 
revise our proposed policy to clarify that an off-Exchange QHP would be 
subject to the risk corridors program if it met the criteria in our 
proposed policy and was offered on an Exchange by the same ``issuer 
group,'' as defined at 45 CFR 156.20, instead of the same issuer.
    Response: While we recognize that the structure of some 
organizations may result in Exchange offerings and offerings outside of 
an Exchange that are offered by different issuers within the same 
issuer group, we believe that expanding this definition beyond the 
issuer level is inconsistent with how pricing is developed pursuant to 
the single risk pool provision at 45 CFR 156.80, which applies at the 
issuer level to all non-grandfathered plans in the individual and small 
group markets within a State. Expanding the risk corridors program to 
plans that are the same or substantially the same as QHPs offered 
outside the Exchange by a different issuer within an issuer group could 
result in a risk corridors calculation that must take into account 
total claims costs and total premiums for the entire risk pool for all 
the relevant issuers in the issuer group. We believe the risk corridors 
program properly considers claims and premiums only for the risk pool 
applicable to the single issuer.
    Comment: One commenter supported our proposal requiring a plan 
offered outside of an Exchange to have an identical provider network 
and service area as a QHP offered through an Exchange in order to be 
the same plan as the QHP offered through the Exchange. Another 
commenter opposed these requirements, arguing that the proposed 
standard should only include EHB, actuarial value (AV), and cost-
sharing structure. The commenter believed that requiring identical 
networks and service areas was too restrictive because it would not 
allow for differences in network and service areas that result from 
licensure restrictions.
    Response: As stated above, a plan is the same as a QHP only if it 
is identical with respect to benefits, provider network, service area, 
and cost-sharing structure to a QHP offered by the same issuer through 
the Exchange. We believe that certification of a plan's service area is 
an integral part of the QHP certification process, and so believe it is 
integral to what it means to be the same QHP. We also believe it 
important that Exchange enrollees enjoy access to the same service 
areas (and networks) as enrollees in the same plans when offered 
outside the Exchanges.
Summary of Regulatory Changes
    We are finalizing the definition of ``Exchange'' as it was 
proposed. We are not codifying changes to the definition of ``qualified 
health plan'' in this section. For purposes of clarity, in finalizing 
this policy, we will use the term ``issuer application assisters'' in 
place of ``issuer customer service representatives'' to more clearly 
articulate the role of such individuals and we are finalizing a 
modified definition of ``issuer application assisters'' to reflect in 
more detail the role of issuer application assisters as defined in 
Sec.  155.415.
2. Subpart B--General Standards Related to the Establishment of an 
Exchange
a. Establishment of a State Exchange, Approval of a State Exchange, 
(Sec. Sec.  155.100, 155.105, and 155.140)
    Consistent with our proposed amendment to the definition of 
``Exchange'' in Sec.  155.20, we proposed to amend Sec.  155.100 to 
permit a State to establish and operate only a State-based SHOP while 
the individual market Exchange is established and operated as an FFE. 
We proposed that pursuant to the proposed amendment, States would not 
be permitted to establish and operate only the individual market 
Exchange.
    We proposed in Sec.  155.100(a)(3) that a State that has timely 
applied for certification of an Exchange for 2014, and that has 
received conditional approval for its application, would be able to 
modify its Exchange Blueprint pursuant to 45 CFR 155.105(e) to exclude 
the operation of the individual market Exchange functions for 2014. We 
explained in the preamble to the proposed rule that such States have 
been preparing to establish and operate both the individual market and 
SHOP Exchanges for 2014, and would be in a position to establish and 
operate just the SHOP in 2014. We sought comment on this approach.
    We proposed to amend Sec.  155.105 so that the Exchange approval 
criteria set forth therein would be consistent with the Exchange 
operational models proposed in Sec. Sec.  155.20, 155.100, and 155.200, 
and to permit HHS to operate only a FFE that will make QHPs available 
to qualified individuals when a State has elected to operate only an 
Exchange providing for the establishment of a SHOP pursuant to proposed 
Sec.  155.100(a)(2).
    We also proposed an amendment to Sec.  155.105(f) to clarify that 
the regulatory provisions that will apply in an FFE include the 
nondiscrimination requirements of Sec.  155.120(c). Section 155.120(c), 
as written, applies to all Exchanges, and its previous omission from 
the list of provisions referenced in Sec.  155.105(f) was inadvertent.
    We also proposed to amend Sec.  155.140 to clarify how a subsidiary 
or regional Exchange may operate in light of the proposed amendments to 
permit a State to establish and operate an Exchange only providing for 
the establishment of a SHOP.
    Comment: We received several general comments in support of 
permitting a State to elect to establish and operate only a SHOP. Some 
commenters supported the additional flexibility provided for States to 
establish and operate only a SHOP in 2014 and recommended expanding the 
provision further to allow other States, such as States that timely 
submitted a complete Blueprint, to establish and operate only a SHOP in 
2014. One commenter supported allowing any State that believes it would 
be ready to establish and operate only a SHOP to do so in 2014. Other 
commenters opposed allowing a State to establish and operate only a 
SHOP, noting potential adverse consequences to consumers due to a loss 
of efficiencies and coordination by having different entities 
administering

[[Page 54076]]

the individual market Exchange and the SHOP. One commenter supported 
the proposed policy of not allowing a State to establish and run only 
an individual market Exchange and the while the SHOP is established and 
operated as an FF-SHOP. This commenter noted that in this scenario, 
there would be less leverage for attracting issuer participation in the 
SHOP and the SHOP would suffer diminished operational efficiencies if 
it is not accompanying an individual market Exchange.
    Response: We agree with the commenters who suggested that we should 
extend the opportunity to establish and operate only a SHOP in 2014 to 
more than just those States that have a conditionally approved Exchange 
Blueprint in place for 2014. As we explained in the preamble to the 
proposed rule, our intent in limiting the option in 2014 was to make 
sure that only those States that would be in a position to establish 
and operate just the SHOP in 2014 do so. We are convinced by the 
commenters who suggested that these States might include more than just 
those States with a conditionally approved Exchange Blueprint. 
Accordingly, we have modified the proposed language to extend the 
option of establishing and operating only a SHOP Exchange for 2014 to 
any State that provides reasonable assurances, through the Exchange 
Blueprint submission and/or amendment process, to CMS that it will be 
in a position to establish and operate just a SHOP in 2014.
    Comment: A number of commenters expressed support for our 
clarification in Sec.  155.105(f) that the regulatory provisions that 
apply in FFEs include the nondiscrimination requirements of Sec.  
155.120(c). Commenters recommended including in Sec.  155.105(f) a 
reference to section 1557 of the Affordable Care Act, and one commenter 
asked CMS to identify prohibited practices under section 1557 of the 
Affordable Care Act. Commenters also requested further clarification on 
the application of these antidiscrimination protections to consumer 
assistance entities receiving funds associated with implementation and 
operation of the Federally-facilitated Exchanges.
    Response: We are finalizing this clarification as proposed. We note 
that Sec.  155.120(c)(1) already specifies that the State and the 
Exchange, which would include FFEs and State Partnership Exchanges 
through this amendment to 155.105(f), must comply with applicable 
nondiscrimination statutes. Section 1557 of the Affordable Care Act 
applies to all Exchanges as entities created under Title I of the 
Affordable Care Act. Therefore, we do not think it is necessary to 
refer to any specific nondiscrimination statutes in this regulation 
text. Further clarification of prohibited practices under section 1557 
of the Affordable Care Act is beyond the scope of this rulemaking. For 
a more detailed discussion of the application of Sec.  155.120(c) to 
Exchange consumer assistance entities, please see the recent final 
rule, 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 42824, 42829-42830, 42844 (July 17, 
2013).
    Comment: One commenter sought clarification in proposed Sec.  
155.140 on the provision relating to the geographic area covered by 
subsidiary SHOPs in a State operating only a SHOP. The commenter wanted 
to ensure that if a State establishes subsidiary SHOPs that it must 
provide access to a SHOP in all geographic areas of the State.
    Response: We clarify here that the proposed provision on subsidiary 
SHOPs in a State operating only a SHOP requires the combined geographic 
area of all subsidiary SHOPs established by the State to encompass all 
geographic areas of the State. In such circumstances, HHS would 
establish an individual market Exchange that covers all geographic 
areas of the State. Thus, the combined geographic areas of any 
subsidiary SHOPs would also be required to encompass all geographic 
areas of the State.
Summary of Regulatory Changes
    We are finalizing these provisions as follows. We are finalizing 
Sec.  155.100(a)(3) at 155.100(b) and redesignating Sec.  155.100(b) as 
Sec.  155.100(c) to ensure parallel structure in the regulatory text. 
We are modifying Sec.  155.100(b) to expand the opportunity to operate 
only a SHOP in 2014 to States that provide reasonable assurances, 
through the Exchange Blueprint submission and/or amendment process, to 
CMS that they are prepared to establish and operate only a SHOP in 
2014. We are also modifying Sec.  155.105(b)(1) and (f) to include 
cross-references to the Exchange minimum functions concerning 
eligibility appeals and exemptions from the shared responsibility 
payment that are being finalized at the time of this rule.
3. Subpart C--General Functions of the Exchange
a. Functions of an Exchange (Sec.  155.200)
    Consistent with the amendments described above to Sec. Sec.  
155.20, 155.100, 155.105, and 155.140, which permit a State to operate 
only an Exchange providing for the establishment of a SHOP, we proposed 
amending Sec.  155.200 so that a State operating an Exchange which 
provides only for the establishment and operation of a SHOP need 
perform only the minimum functions described in subpart H and all 
applicable provisions of other subparts referenced therein. Under such 
circumstances, the Exchange operated by HHS need not perform the 
minimum functions related to the establishment of a SHOP.
    Although we received no direct comment on this proposal, we 
received several general comments and comments to Sec.  155.100 in 
support of permitting a State to elect to establish just a SHOP.
Summary of Regulatory Changes
    We are finalizing the provision, with a modification to include 
cross-references to the Exchange minimum functions concerning 
eligibility appeals and exemptions from the shared responsibility 
payment that are being finalized at the time of this rule.
b. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    We proposed amending Sec.  155.220(c)(3)(i), which currently 
requires that a Web-broker meet all standards for disclosure and 
display of QHP information contained in Sec.  155.205(b)(1) and Sec.  
155.205(c). We sought comment on whether we should instead remove Sec.  
155.220(c)(3)(ii).
    We proposed adding a new paragraph (c)(3)(vii) that would require a 
disclaimer be used by Web-brokers on their Web sites.
    We proposed to add a new Sec.  155.220(c)(4) that would require any 
Web-broker who makes an Internet Web site available to other agents and 
brokers to enroll consumers in QHPs through the FFE to require as a 
condition of agreement or contract that the agent or broker accessing 
and using the Internet Web site complies with Sec.  155.220(c) and (d). 
We also proposed that a Web-broker that makes an Internet Web site 
available for this purpose would be required to provide to HHS a list 
of agents and brokers who are under such arrangements, and that the 
Web-broker

[[Page 54077]]

be required to ensure that the agent or broker accessing or using the 
Internet Web site would be required to comply with the policies that 
the Web-broker would be required to develop under proposed Sec.  
155.220(d)(4).
    We further proposed adding a new Sec.  155.220(d)(4) requiring 
agents and brokers assisting or enrolling consumers in the individual 
market of an FFE to establish policies and procedures implementing the 
privacy and security standards pursuant to Sec.  155.220(d)(3). We 
proposed such standards to include training employees, representatives, 
contractors, and agents with regard to those policies and procedures on 
a periodic basis, and to ensure such individuals comply with those 
policies and procedures. We sought comment on the appropriate frequency 
of retraining requirements.
    We also proposed adding a new Sec.  155.220(f), which would require 
agents and brokers who wish to terminate their agreement with an FFE to 
send to HHS a 30-day advance written notice of the intent to terminate, 
and invited comment on whether we should additionally require agents 
and brokers to also directly notify their clients of the termination.
    We proposed adding a new Sec.  155.220(g), which would set forth 
standards under which HHS may terminate an agent's or broker's 
agreement with an FFE for cause. In Sec.  155.220(g)(1), we proposed 
that HHS may pursue termination with notice of an agent's or broker's 
agreement with an FFE executed pursuant to Sec.  155.220(d) if, in 
HHS's determination, a specific finding of noncompliance or pattern of 
noncompliance is sufficiently severe. In Sec.  155.220(g)(2), we set 
forth the violations that could lead to a termination for cause. We 
explained that we were also considering implementing informal 
procedures to resolve certain compliance issues that would take place 
prior to HHS's termination of an agent's or broker's agreement for 
cause. Notwithstanding the fact that we were also contemplating an 
informal resolution procedure, we also proposed that upon 
identification of a sufficiently severe violation, HHS would formally 
notify the agent or broker of the specific finding of noncompliance or 
pattern of noncompliance, as proposed in Sec.  155.220(g)(3). The agent 
or broker would then have a period of 30 days from the date of the 
notice to correct the noncompliance to HHS's satisfaction, through good 
faith efforts. If after 30 days, the noncompliance is not appropriately 
addressed, we proposed HHS may terminate the agreement for cause.
    We proposed adding a new Sec.  155.220(h) to provide an agent or 
broker whose agreement with the FFE was terminated for cause with a 
process to request reconsideration of the termination. We proposed that 
the agent or broker must submit a request for reconsideration to the 
HHS reconsideration entity within 30 calendar days of the date of the 
written notice from HHS, after which the HHS reconsideration entity 
would provide the agent or broker with a written notice of a final 
reconsideration decision within 30 calendar days of the date the 
request was received.
    Comment: Many commenters offered feedback on the proposed amendment 
to Sec.  155.220(c)(3)(i). Some commenters expressed support for the 
amendment while several other commenters opposed any changes to the 
requirement for Web-brokers to display QHP information. In expressing 
their opposition to the amendment of Sec.  155.220(c)(3)(i), some 
commenters offered recommendations in the event we finalized the 
amendment. Some commenters suggested that a Web-broker prominently 
display a standardized disclaimer provided by HHS if the Web-broker is 
not able to display the required QHP information for a given plan, and 
that the Web-broker provide a Web link to the Exchange Web site.
    Response: We did not accept the comments which suggested that we 
not finalize the proposed amendment to Sec.  155.220(c)(3)(i) because 
there may be circumstances beyond the control of Web-brokers that will 
preclude them from displaying all of the information required under 
Sec.  155.205. For instance, Web-brokers currently obtain plan data 
directly from issuers, and generally only obtain data from issuers if 
they have contractual arrangements and/or appointments to sell the 
issuer's plans. Thus Web-brokers may be restricted from displaying all 
plan data, including premium and rate information, if they do not have 
agreements or appointments with some issuers. Similarly, the Exchange 
may be precluded by trade secret and confidentiality considerations 
from providing all Web-brokers with certain data elements necessary to 
meet the Sec.  155.205(b)(1) standards. As a result, we continue to 
believe that the amendment to Sec.  155.220(c)(3)(i) is necessary. In 
such circumstances, it is important that Web-brokers ensure applicants 
are aware that not all QHP information may be available on their Web 
sites by displaying required disclaimers under Sec.  155.220(c)(3)(i) 
and (vii).
    Comment: The proposed amendment to Sec.  155.220(c)(3)(i) also 
added to the standards for Web-brokers' Web sites by requiring a link 
to the Exchange Web site. In addition, proposed Sec.  
155.220(c)(3)(vii) required a disclaimer that included acknowledgement 
that the Web-broker's Web site might not display all QHP data available 
on the Exchange Web site. A number of commenters proposed combining 
these two concepts, recommending that HHS provide a standardized 
disclaimer and a link to the Exchange Web site to the extent that not 
all QHP information required under Sec.  155.205(b)(1) is displayed on 
a Web-broker's Web site. Conversely, other commenters suggested that 
this disclaimer should be separate from the disclaimer proposed in 
Sec.  155.220(c)(3)(vii) informing the consumer that the Web-broker's 
Web site is not the Exchange Web site. Commenters suggested that a 
standardized disclaimer would provide a uniform and consistent way to 
notify the consumer regarding how to obtain the available QHP 
information in the event that such information is not available on the 
Web-broker's Web site.
    Response: We found these comments regarding the need for a 
standardized disclaimer and Web-link to be persuasive so applicants are 
aware of the incompleteness of the information available on these Web 
sites. As a result, we have modified the amendment to Sec.  
155.220(c)(3)(i) by requiring Web-brokers to prominently display a 
standardized disclaimer and to provide a Web link to the Exchange Web 
site. We will make available a HHS-approved standardized disclaimer 
that Web-brokers can use to meet this requirement, stating that 
information required under Sec.  155.205(b)(1) for the QHP is available 
on the Exchange Web site.
    We considered, but did not accept, other recommendations provided 
by commenters if the amendment were to be retained, including 
consideration of an inline frame or ``I-frame'' approach to presenting 
QHP information, requiring that Web-brokers refer consumers to 
Navigators and certified application counselors if unable to display 
all QHP information, and to have HHS release all plan information for a 
particular QHP to Web-brokers if the issuer of the QHP requests that 
HHS do so. We recognize that each of these suggestions may help provide 
additional information to consumers about their QHP options, but may be 
difficult to implement prior to the start of open enrollment.

[[Page 54078]]

    Comment: Many commenters offered recommendations about whether to 
remove Sec.  155.220(c)(3)(ii), which requires Web-brokers to provide 
consumers with the ability to view all QHPs offered through the 
Exchange, as an alternative to amending Sec.  155.220(c)(3)(i). Several 
commenters expressed support for retaining Sec.  155.220(c)(3)(ii) as a 
key consumer protection, while other commenters recommended removing 
the requirement in lieu of amending Sec.  155.220(c)(3)(i).
    Response: We agree with commenters that the requirement for Web-
brokers to provide consumers with the ability to view all QHPs offered 
through the Exchange is an important consumer protection, even if the 
Web-broker is not able to display all plan details for each QHP. We are 
retaining Sec.  155.220(c)(3)(ii) without modification.
    Comment: A number of commenters expressed support for proposed 
Sec.  155.220(c)(3)(vii) so consumers would be informed that the Web-
broker's Web site is not the Exchange Web site, and that the Web-broker 
has agreed to comply with applicable regulations as a condition of 
their agreements with HHS. Some commenters recommended that HHS provide 
a standardized disclaimer that could be used by all Web-brokers to meet 
this requirement, to ensure uniform and consistent communication to 
consumers across all Web-broker Web sites. Commenters recommended 
specific elements that should be included in the disclaimer. Other 
commenters suggested that Web-brokers be required to display the 
disclaimer in specific locations or on every page of the Web-broker's 
Web site. One commenter recommended that the disclaimer not reference 
the Web-broker's agreement with HHS, but rather the standards to which 
the Web-broker must comply. To provide for greater consumer protection, 
several commenters also suggested that HHS standardize the notification 
by providing a standardized disclaimer, which would provide for uniform 
and consistent communication to consumers across all Web-broker Web 
sites.
    Response: The proposed Sec.  155.220(c)(3)(vii) added to the 
standards for Web-broker's Web sites in FFEs by requiring prominent 
display of language notifying consumers that the agent's or broker's 
Web site is not the FFE Web site, that the agent or broker's Web site 
might not display all QHP data available on the FFE Web site, that the 
agent or broker has entered into an agreement with HHS pursuant to 
paragraph (d) of this section, and that the agent or broker agrees to 
conform to the standards specified in paragraphs (c) and (d) of this 
section. While the proposed Sec.  155.220(c)(3)(vii) specified the 
elements to be included in the notification, it would have permitted 
Web-brokers to independently develop their own notifications.
    To provide for greater consumer protection, we agree with 
commenters that a standardized disclaimer should be used for the FFEs, 
and we have modified the final Sec.  155.220(c)(3)(vii) to require Web-
brokers to use a standardized disclaimer provided by HHS, which would 
distinguish the Web-broker's Web site from the FFE Web site. The 
standardized disclaimer would include the following notifications: (1) 
That the Web-broker's Internet Web site is not an FFE Web site, (2) 
that the Web-broker's Web site may not contain all QHP data available 
on the FFE Web site, (3) that the Web-broker is required to conform to 
the standards specified in paragraphs (c) and (d) of Sec.  155.220, and 
(4) the Web-broker is subject to privacy and security standards 
established by HHS pursuant to Sec.  155.260.
    We also recognize that commenters provided other suggestions for 
topics to include in the disclaimer, including information about 
whether the Web-broker's Web site contains all information for QHPs in 
a given State, or information about how consumers can contact HHS if 
the Web-broker does not comply with the requirements for display of 
QHPs. Although we are not adopting these suggestions at this time, HHS 
may adjust the disclaimer in the future to meet the needs of the FFE 
and its consumers.
    We believe that requiring the disclaimer to be posted on every Web 
page of a Web-broker's Web site may be repetitive and burdensome. 
However, we agree that the disclaimer should be prominently displayed, 
and that display on more than a single Web page may be warranted so 
that the consumer may be fully informed. We plan to address how the 
disclaimer should be displayed in future guidance.
    Comment: Several commenters recommended that we clarify the process 
that Web-brokers must follow when a consumer (or a member of that 
consumer's family) using a Web-broker's Web site is determined or 
assessed to be eligible for Medicaid or CHIP.
    Response: As indicated in CMS's guidance titled ``Role of Agents, 
Brokers, and Web-brokers in Health Insurance Marketplaces,'' \6\ we 
expect agents and brokers, including Web-brokers, to work with all 
consumers, including individuals who are ultimately determined to be 
eligible for Medicaid or CHIP. In such cases, we expect that agents, 
brokers and Web-brokers will refer the individual to the appropriate 
State agency for enrollment in health coverage.
---------------------------------------------------------------------------

    \6\ Role of Agents, Brokers, and Web-brokers in Health Insurance 
Marketplaces (May 1, 2013), available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/agent-broker-5-1-2013.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters recommended that we apply Sec.  
155.220(c)(3)(vii) to State Exchanges. Other commenters requested that 
we clarify that State Exchanges are not required to contract with Web-
brokers, and that they may set more stringent standards than the FFE.
    Response: While we did not accept the comment to apply Sec.  
155.220(c)(3)(vii) to State Exchanges, we note that State Exchanges 
have discretion to apply a similar or more stringent requirements.
    Comment: We received substantial feedback on proposed Sec.  
155.220(c)(4). Many commenters expressed support for allowing 
arrangements under which agents and brokers would be able to enroll 
qualified individuals in an FFE through a Web-broker's Internet Web 
site, even if the agent or broker were not an employee or subcontractor 
of the Web-broker. Such commenters noted that requiring independent 
agents and brokers to subcontract with Web-brokers is not standard in 
the industry. Some commenters recommended that we clarify the types of 
arrangements that would be permitted between Web-brokers and other 
agents and brokers. Other commenters recommended prohibiting agents and 
brokers from accessing Web-brokers' Web sites altogether, unless they 
were an employee or subcontractor of the Web-broker. Such commenters 
believed that such arrangements bring additional complexity, noting 
that Web-brokers' Web sites may not display all required QHP 
information, and were concerned that these agents and brokers might not 
be subject to the same level of oversight as other agents and brokers 
in the FFE, since they are not party to HHS' agreement with the Web-
broker.
    Some commenters responded to our concerns regarding oversight of 
other agents and brokers that access the Web-broker's Web sites, 
objecting to the provision requiring Web-brokers to ensure that agents 
and brokers accessing their Web sites comply with Sec.  155.220(c) and 
(d). These commenters noted that it could result in a Web-broker and 
all agents and brokers accessing its Web site to have their connection 
to the Federally-facilitated Exchange terminated based upon violations 
by a single agent or broker.

[[Page 54079]]

Other commenters provided specific recommendations for Web-broker 
requirements if agents and brokers are permitted to use Web-brokers' 
Web sites to enroll consumers in QHPs through the Exchange, including 
ensuring agents and brokers provide unique identifiers such as FFE User 
ID numbers or National Producer Numbers (NPNs), and other documentation 
to the Web-broker proving they are trained and registered to sell 
products on the Exchange, and have entered into agreements with CMS to 
abide by the terms of Sec.  155.220. Commenters stated there should be 
a way for CMS to identify and notify Web-brokers providing access to 
other agents and brokers, if the other agent or broker commits a 
material breach of their agreements with HHS, so that the Web-broker 
may limit the agent's or broker's access as needed.
    Response: While we recognize that agents and brokers may be able to 
reach and enroll significant number of consumers through Web-broker's 
Web sites, we are also concerned about ensuring that such agents and 
brokers comply with the standards in Sec.  155.220(c) and (d). We note 
that agents or brokers who carry out the functions authorized under 
Sec.  155.220(a)(2) and (3) are required to comply with the standards 
in Sec.  155.220(c) and (d), regardless of whether they use a Web-
broker's Web site, and that they ultimately remain responsible for 
their own compliance. Many agents and brokers currently use Web sites 
and other systems technology provided by Web-brokers to help 
significant numbers of consumers compare and purchase individual market 
coverage across multiple issuers. If Web-brokers are able to provide a 
way for other agents and brokers to leverage their Web sites and 
connection to HHS when the Exchanges begin operating, these agents and 
brokers would be able to reach additional individuals currently without 
coverage. As a result, we did not accept comments that agents and 
brokers be prohibited from entering into arrangements that would enable 
them to use a Web-broker's Web site to assist a consumer in enrolling 
in a QHP through the Exchange. While we recognize that some Web-brokers 
might be willing to be responsible for overseeing the actions of other 
agents and brokers who access their Web sites, we also did not want to 
limit the permissible arrangements to those in which the agent and 
broker can only use the Web-broker's Web site as a subcontractor so as 
to maximize opportunity for agent and broker participation.
    We also recognize the concerns of Web-brokers that they, along with 
other agents and brokers who access their Web sites, might be held 
accountable for the non-compliance of a single agent or broker. 
However, we also want to ensure that HHS can take action against the 
single non-compliant agent or broker if necessary, and that the Web-
broker and HHS can terminate that agent's or broker's ability to 
transact eligibility and enrollment information through the Web-
broker's Web site. We also want to ensure that HHS has a way to contain 
privacy and security incidents and breaches, should they be caused by 
agents and brokers accessing the Web-brokers' Web sites. As a result, 
we have modified the proposed Sec.  155.220(c)(4) so that the Web-
broker is no longer the entity that must ensure that agents and brokers 
accessing its Web site comply with the standards in Sec.  155.220(c) 
and (d). We accept commenters' recommendations that the Web-broker must 
verify that any other agent or broker accessing its Web site is 
licensed by the applicable State(s), has completed training, has signed 
all required agreements with the FFE, and is registered with the FFE 
pursuant to Sec.  155.220(d). The Web-broker must cooperate with HHS in 
taking compliance actions against a non-compliant agent or broker, 
including facilitating a shut-down of any connection to HHS systems 
while privacy and security incidents and breaches are investigated, 
ensuring compliance with applicable standards by all agents and brokers 
accessing its Web site, and performing necessary actions to assist HHS 
with overseeing the actions of agents and brokers using its Web site. 
In response to the comments, we believe that requiring the Web-broker 
to display its name and identifier on the Web site when it is made 
available to another agent or broker, will increase transparency 
regarding the relationships between the other agents and brokers and 
the Web-broker, and facilitate CMS and/or State enforcement actions 
against an agent or broker accessing its Web site, in the event of a 
breach or violation.
    In response to all of these comments, we are modifying the final 
Sec.  155.220(c)(4) to clarify the requirements that apply to a Web-
broker that permits other agents or brokers to access its Web site 
pursuant to a contractual arrangement. In response to comments 
recommending clarification of the types of permissible arrangements 
between Web-brokers and other agents and brokers under this provision, 
we clarify that the provision applies to contractual or other 
arrangements in which an agent or broker accesses the Web-broker's Web 
site to enroll consumers through the FFE. We have also added language 
to the final rule clarifying that in such arrangements, the agent or 
broker is the agent of record on the enrollment. As finalized, Sec.  
155.220(c)(4) would allow HHS to identify Web-broker's Web sites and 
take appropriate action if the agent or broker who uses the Web-
broker's Web site violates the terms of the agent's or broker's 
agreement with HHS. Section 155.220(c)(4)(i) applies the following 
requirements on Web-brokers that allow other agents and brokers to 
access their Web sites: (1) The Web-broker must provide the FFE with a 
list of agents or brokers who enter into such an arrangement if 
requested by HHS; (2) the Web-broker must verify that the agent or 
broker using the Web site is licensed in the FFE's State, has completed 
training and registration, and has signed all applicable agreements 
with the Federally-facilitated Exchange; (3) the Web-broker must ensure 
that its name and any identifier required by HHS, such as the Web-
broker's National Producer Number (NPN), appears on the Internet Web 
site and written materials containing QHP information that can be 
printed from the Web site, even if the agent or broker that is 
accessing the Internet Web site is able to customize the appearance of 
the Web site; (4) terminate the other agent or broker's access to its 
Web site if HHS determines that the agent or broker is in violation of 
the provisions of Sec.  155.220 and any required agreement between HHS 
and the agent or broker is terminated; and (5) report to HHS and 
applicable State Department of Insurance any potential material breach 
of the standards in Sec.  155.220(c) and (d) by the agent or broker 
accessing the Internet Web site, should the Web-broker become aware of 
any such potential breach.
    This approach would ensure that agents and brokers that access Web-
broker's Web sites must meet the same registration and training 
requirements and be subject to the same oversight requirements as other 
agents and brokers in the FFE. This approach would also ensure that 
agents and brokers whose agreements with HHS are terminated are no 
longer able to access HHS systems through a Web-broker's connection. In 
addition, this requirement would also help provide transparency and 
traceability back to the Web-broker making the Web site available, if 
HHS or a State department of insurance needed to take action with 
respect to an agent or broker using a Web-broker's Web site.
    Section 155.220(c)(4)(ii) clarifies that HHS retains the right to 
temporarily

[[Page 54080]]

suspend the Web-broker's connection to HHS' systems in the event of a 
privacy and security incident or breach involving a Web-broker that 
makes its Web site available to third party agents and brokers under 
previously described arrangements. In the case of an incident or 
breach, HHS must follow its incident response plan to address privacy 
and security incidents and breaches. In adhering to its incident 
response plan, HHS may need to temporarily suspend a Web-broker's 
connection to HHS' systems to contain further damage from the incident 
or breach if the incident or breach is related to the Web-broker and 
its connection to HHS' systems. The temporary suspension would provide 
HHS with the ability to conduct an investigation and work with the Web-
broker to remedy the breach or incident.
    Comment: Several commenters recommended that Web-brokers not be 
permitted to use data collected for Exchange enrollment purposes for 
any other purpose.
    Response: Data collected for Exchange application purposes may be 
used only in accordance with section 1411(g) of the Affordable Care 
Act. Consistent with section 1411(g), in the agreements that HHS will 
enter into with Web-brokers, HHS will permit Web-brokers to use 
personally identifiable information (PII) collected through the 
Exchange application and enrollment process only for certain functions 
related to the efficient operation of the Exchange, such as assisting 
with applications for QHP eligibility, supporting QHP selection and 
enrollment by assisting with plan selection and plan comparisons, and 
assisting with applications for the receipt of APTCs or CSRs, and 
selecting an APTC amount.
    Comment: Several commenters expressed support for proposed Sec.  
155.220(d)(4), which proposed requiring agents and brokers 
participating in the FFE individual market to implement policies to 
train their workforce in privacy and security standards pursuant to 
Sec.  155.220(d)(3). Some commenters further recommended that such 
training occur on an annual basis, at a minimum. One commenter also 
recommended that HHS clarify that agents and brokers could only use PII 
accessed from individuals during the QHP eligibility and enrollment 
process for FFE-related functions that agent or broker is authorized to 
carry out under the terms of its agreement with HHS, and several others 
stressed that agents and brokers should be required to destroy any PII 
obtained during the eligibility and enrollment process after the 
termination of an agent or broker's relationship with an FFE.
    Response: We believe it is critical to ensure that agents and 
brokers implement appropriate safeguards and procedures, including 
privacy and security training to protect the PII of individuals whom 
they assist with applications for Exchange coverage, advance payments 
of the premium tax credit, and cost sharing reductions, and with QHP 
enrollment through the FFE. We note that Sec.  155.260(b) requires non-
Exchange entities, including agents and brokers, to abide by the 
privacy and security policies adopted by the FFE as a condition of 
contract or agreement with the FFE. Because obligations regarding 
compliance with privacy and security standards will be imposed on 
agents and brokers through agreements executed pursuant to Sec.  
155.260(b), we are not finalizing Sec.  155.220(d)(4), or additional 
privacy and security requirements for agents and brokers in this rule. 
Instead we clarify here that in the FFEs, agents and brokers will agree 
to comply with the Exchange's privacy and security standards as 
required by Sec.  155.220(d)(3) through separate agreements that the 
FFE will execute with agents and brokers under Sec.  155.260. Such 
agreements will specify the authorized functions for which agents and 
brokers may use PII, and will set forth the agent's or broker's duties 
to protect and maintain the privacy and security of PII for such 
functions, including developing privacy and security training programs 
for members of their workforces who access PII while carrying out such 
authorized functions. The agreements will also prohibit agents and 
brokers from using PII accessed through the Exchange application and 
enrollment process for any purpose other than the specific functions 
authorized by the agreements.
    HHS seeks to minimize burdensome duplication of existing laws and 
any Exchange-specific requirements and standards for protecting PII 
pursuant to section 1411(g) and Sec.  155.260. We recognize that agents 
and brokers are also required to adhere to other Federal laws 
safeguarding certain kinds of information, such as HIPAA and the Gramm-
Leach-Bliley Act (GLBA), in addition to any applicable State laws, and 
may leverage existing compliance infrastructures as appropriate to 
implement Exchange privacy and security requirements to protect PII.
    Comment: We received broad support from commenters for proposed 
Sec.  155.220(f), which provided for a 30-day advance written notice of 
termination from agents and brokers to HHS. A few commenters stressed 
it would be appropriate for all agents or brokers that receive a 30-day 
advanced notice of termination to be immediately suspended from 
assisting individuals to enroll in a QHP offered through the FFE and/or 
the ability to securely exchange information with HHS, at least 
temporarily. In response to our request for comments, commenters 
expressed support for a requirement that agents and brokers notify 
clients of such termination. Commenters recommended that agents and 
brokers should continue to assist existing clients with completion of 
QHP applications and/or enrollment until the agent's or broker's 
intended date of termination, and to inform clients that additional 
assistance is available through the FFE.
    Response: We agree with commenters' recommendations to also require 
agents and brokers to notify consumers if the agent or broker plans to 
terminate its agreement with an FFE under Sec.  155.220(f). Further, we 
agree that agents and brokers should continue assisting consumers 
throughout the pre-termination period, and should inform consumers that 
they can continue to obtain additional assistance through an FFE. We 
have modified the final rule to include provisions reflecting these 
comments.
    Comment: Several commenters supported proposed Sec.  155.220(g) and 
suggested that we specify that HHS may terminate an agent's or broker's 
agreement for violations of specific State laws, including patterns of 
steering or unfair and deceptive trade practices. Other commenters that 
expressed support for Sec.  155.260(g) also recommended HHS immediately 
suspend an agent's or broker's agreement, if findings of noncompliance 
were sufficiently egregious, until the cure period is completed to HHS' 
satisfaction.
    Response: We will look to State authorities to enforce their own 
State laws regulating agents and brokers. In response to the comments 
regarding immediate and temporary suspensions or terminations from the 
FFE, we believe the implementation of an informal resolution procedure 
prior to terminating an agent's or broker's agreement that was 
discussed in the preamble and contemplated under the cure period in 
Sec.  155.220(g), addresses the range of potential responses and 
recognizes that nothing would preclude HHS from retaining the right to 
bypass these informal procedures. We also note that HHS retains the 
ability to terminate an agent's or broker's relationship with an FFE 
for cause, including based on termination of the separate agreement 
executed pursuant to Sec.  155.260(b).

[[Page 54081]]

    Comment: Several commenters also recommended HHS should be required 
to inform State departments of insurance (DOIs) of any administrative 
or disciplinary actions taken against licensed agents and brokers for 
violations of FFE rules under Sec.  155.220. One commenter also 
suggested HHS should not take any action based on an FFE violation 
until the State takes action.
    Response: As we emphasized in the preamble to the proposed rule, we 
expect that States will continue to oversee and regulate agents and 
brokers within their States, both inside and outside of the Exchange. 
This applies whether the Exchange is an FFE, including a State 
Partnership Exchange, or a State Exchange. To avoid duplication of 
oversight activities related to agents and brokers enrolling or 
assisting consumers through an FFE, HHS will focus its oversight 
activities primarily on ensuring that agents and brokers in an FFE meet 
the standards outlined in Sec.  155.220, including the requirements set 
forth in the agreements entered into under Sec.  155.260(b). Thus, we 
intend to defer to States in all areas where the State DOIs are the 
primary regulators of agent and broker conduct, which will entail open 
communication and collaboration with State DOIs.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.220(c)(3) of 
the proposed rule as follows: in paragraph (c)(3)(i), we amend the 
provision to require the prominent display of a standardized disclaimer 
provided by HHS stating that QHP information required under Sec.  
155.205(b)(1) is available on the Exchange Web site and providing Web 
link to the Exchange Web site, for use when not all QHP information 
required under Sec.  155.205(b)(1) is displayed on the Web-broker's Web 
site. In paragraph (c)(3)(vii), we modify the provision to require the 
display of a standardized disclaimer provided by HHS, and provision of 
a Web link to the Exchange Web site. In paragraph (c)(4), we clarify 
that the provisions in this paragraph are applicable to a Web-broker 
when it permits other agents and brokers to use its Internet Web site 
to enroll individuals in an FFE through a contract or other 
arrangement, and the agent or broker accessing the Web site pursuant to 
the arrangement is listed as the agent of record on the enrollment. We 
also require that such a Web-broker must: (1) Provide HHS a listing of 
agents and brokers entering into such arrangements if requested by HHS; 
(2) ensure that the agent or broker is licensed in the State in which 
the consumer is selecting the QHP; (3) verify that the agent or broker 
has completed training, registration and has signed all required 
agreements with the FFE; (4) ensure that its name and any identifier 
required by HHS prominently appears on the Internet Web site and on 
written materials containing QHP information that can be printed from 
the Web site, (5) terminate the agent's or broker's access to its Web 
site if HHS determines that the agent or broker is in violation of the 
provisions of this section and/or HHS terminates any required agreement 
with the agent or broker, and (6) report to HHS and the applicable 
State DOI any potential material breach of the standards in Sec.  
155.220(c) and (d), or the agreement entered into pursuant to Sec.  
155.260(b), by the agent or broker accessing the Internet Web site. 
Furthermore, paragraph (c)(4)(ii) also permits HHS to temporarily 
suspend the Web-broker's ability to transact information with HHS in 
the event of a severe privacy and security incident or breach, for the 
period in which HHS conducts an investigation and the incident or 
breach is remedied.
    Additionally, we are not finalizing Sec.  155.220(d)(4) and are 
amending Sec.  155.220(f) to require agents and brokers to also notify 
consumers that they plan to terminate their agreement with an FFE. We 
revised Sec.  155.220(f) and (g) to refer to the agreements that the 
FFE will enter into with agents and brokers pursuant to 155.260(b), and 
are making a technical correction to correct a typographical error in 
Sec.  155.220(h)(3).
c. Electronic Information Exchange With Covered Entities (Sec.  
155.270)
    Section 155.270 of 45 CFR directs Exchanges that perform electronic 
transactions with a HIPAA-covered entity to use standards, 
implementation specifications, operating rules, and code sets adopted 
by the Secretary in 45 CFR parts 160 and 162. When 45 CFR 155.270 was 
finalized in its current form, HHS believed that the HIPAA standard 
transactions, adopted pursuant to 45 CFR Parts 160 and 162, were the 
most appropriate standards for transmitting information electronically 
between Exchanges and issuers. Since then, the Accredited Standards 
Committee X12,\7\ which governs the electronic transactions addressed 
in 45 CFR 160 and 162, has determined that the currently approved 
transaction used to communicate payment-related information, the HIPAA 
ASC X12 005010X218, will not provide the program-level payment 
information necessary for the risk adjustment, reinsurance, and risk 
corridors programs, and therefore does not meet the business 
requirements of the Affordable Care Act programs. As a result, HHS has 
worked with the Accredited Standards Committee X12 to develop and 
finalize the ASC X12 005010X306, referred to as the ``HIX 820.'' The 
HIX 820 meets the same HIPAA technical requirements as the currently 
approved ASC X12 005010X218, but it is a new implementation of the 
transaction, so it has not yet been adopted by the Secretary pursuant 
to 45 CFR parts 160 and 162. We believe that the HIX 820 is another 
appropriate method for transmitting payment-related information between 
the Exchange and a covered entity. We note that the HIX 820 is the only 
method that provides the program-level payment information necessary 
for the risk adjustment, reinsurance, and risk corridors programs. HHS 
intends to use the HIX 820 for those reasons. To provide for 
flexibility should similar situations arise in the future, we proposed 
to amend Sec.  155.270 to specify that to the extent that an Exchange 
performs electronic transactions with a HIPAA-covered entity, an 
Exchange must use standards, implementation specifications, operating 
rules, and code sets that are adopted by the Secretary pursuant to 45 
CFR parts 160 and 162 or that are otherwise approved by HHS. We further 
proposed to approve the HIX 820 transaction for transmitting payment-
related information between the Exchange and a HIPAA-covered entity. We 
note that the choice of transaction protocol does not implicate privacy 
or security concerns.
---------------------------------------------------------------------------

    \7\ The Accredited Standards Committee is chartered by the 
American National Standards Institute. See, http://www.x12.org/.
---------------------------------------------------------------------------

    After considering the comments below, we are finalizing the 
amendment to this provision as proposed. We are also finalizing in the 
preamble approval of the HIX 820 transaction, and we are identifying 
the NACHA CCD with Addenda Record (CCD+) as the HIPAA standard for 
healthcare electronic funds transfer when a HIX 820 transaction is 
transmitted between an Exchange and a covered entity.
    Comment: One commenter asked HHS to require all Exchanges to use 
the HIX 820 transaction as a condition of participation with the 
Federal data services hub because a uniform standard would streamline 
data processes for multi-State issuers.
    Response: HHS will not require Exchanges to use the HIX 820 
transaction. Many State Exchanges are deploying systems using the 
currently

[[Page 54082]]

approved HIPAA ASC X12 005010X218 standard, and we do not wish to 
require States to rework existing implementations.
    Comment: Several commenters asked that HHS commit to working 
through existing standards organizations and attempt to leverage 
existing standards, or those derived from existing standards, for 
approving electronic transactions. Those commenters asked HHS to engage 
the affected stakeholders or trading partners in a formalized advisory 
process to develop an appropriate proprietary transaction standard with 
the goal of minimizing trading partner system disruptions or burdens.
    Response: In the future, we anticipate consulting with stakeholders 
and standards bodies prior to approving a new electronic transaction, 
as we did with the HIX 820 and as we do now with the NACHA CDD with 
Addenda Record (CCD+).
    Comment: One commenter requested that Exchanges that have adopted 
their own transaction standards be permitted to use those standards 
given the limited time period to implement Federal standards.
    Response: In adopting the HIX 820, we are providing Exchanges with 
the flexibility to use a transaction format developed with the 
Affordable Care Act provisions in mind. However, in the interests of 
standardization, we are not permitting States additional flexibility, 
in order to simplify issuers' implementation.
    Comment: One commenter recommended that the Secretary clarify in 
the final rule that the healthcare EFT standard under HIPAA should be 
used as the electronic funds transfer when an HIX 820 transaction is 
transmitted between an Exchange and a HIPAA-covered entity. One 
commenter recommended that the Secretary ``otherwise approve'' the use 
of the Corporate Trade Exchange (CTX) Automated Clearing House (ACH) 
standard as an alternative healthcare electronic funds transfer 
standard for use when an Exchange and a covered entity need to transmit 
a HIX 820.
    Response: We are clarifying that the NACHA CCD with Addenda Record 
(CCD+) is the healthcare electronic funds transfer standard when a HIX 
820 transaction is transmitted between an Exchange and a covered 
entity. We are not approving use of the CTX ACH standard because the 
CCD+ is the healthcare electronic funds transfer standard adopted 
pursuant to 45 CFR 162.1602 (77 FR 1556) for the period on and after 
January 1, 2014.
Summary of Regulatory Changes
    At 45 CFR 155.270, we are finalizing this provision related to the 
use of standards and protocols for electronic transactions as proposed.
d. Oversight and Monitoring of Privacy and Security Requirements (Sec.  
155.280)
    In Sec.  155.280, consistent with section 1411(g) and (h) of the 
Affordable Care Act, we proposed that HHS will monitor any individual 
or entity who would be subject to the privacy and security requirements 
as established and implemented by an Exchange under Sec.  155.260. We 
proposed in Sec.  155.280(a) that HHS will oversee and monitor the FFEs 
and non-Exchange entities associated with FFEs for compliance with the 
privacy and security standards established and implemented by the FFEs 
pursuant to Sec.  155.260 for compliance with those standards. We 
proposed that HHS will monitor State Exchanges for compliance with the 
privacy and security standards established and implemented by the State 
Exchanges pursuant to Sec.  155.260. In addition, we proposed that 
State Exchanges will oversee and monitor non-Exchange entities 
associated with the State Exchange for compliance with the standards 
implemented by the State Exchange pursuant to Sec.  155.260.
    In Sec.  155.280(b), we proposed the oversight activities that HHS 
may conduct in order to ensure adherence to the privacy and security 
requirements in Sec.  155.260. These may include, but are not limited 
to, audits, investigations, inspections and any reasonable activities 
necessary for appropriate oversight of compliance with the Exchange 
privacy and security standards as permitted under sections 1313(a)(2) 
and (a)(3) of the Affordable Care Act.
    In Sec.  155.280(c)(1)(i) and (ii), we proposed definitions for the 
terms ``incident'' and ``breach'' as they apply to the privacy and 
security of PII in the Exchanges. In Sec.  155.280(c)(2) we proposed 
that in the event of an incident or breach, the entity where the 
incident or breach occurs would be responsible for reporting and 
managing it according to the entity's documented incident handling or 
breach notification procedures.
    In Sec.  155.280(c)(3), we proposed that FFEs, non-Exchange 
entities associated with FFEs, and State Exchanges must report all 
privacy and security incidents and breaches to HHS within one hour of 
discovering the incident or breach. We also proposed that a non-
Exchange entity associated with a State Exchange must report all 
privacy and security incidents and breaches to the State Exchange with 
which they are associated.
    Comment: We received comments expressing concern about the 
requirements of Sec.  155.280 that would apply to entities that are 
already required to be HIPAA-compliant. Commenters noted that there are 
existing State-based insurance regulations as well as existing Federal 
laws that apply to the various types of the non-Exchange entities that 
will be associated with FFEs. These commenters were concerned that HHS 
was proposing to implement an additional regulatory regime with largely 
the same goals as HIPAA and other laws and regulations, which would be 
overly burdensome. Commenters suggested relying on compliance with 
existing HIPAA regulations and standards, or accountability under 
State-based insurance regulation, to provide adequate oversight and 
monitoring to ensure compliance.
    Response: Section 155.260 was implemented to create a uniform set 
of privacy and security principles that would apply to Exchanges and 
non-Exchange entities. Section 155.280 permits Exchanges to conduct 
oversight to ensure compliance with the standards established pursuant 
to Sec.  155.260. We believe that a single comprehensive framework is 
needed for oversight and monitoring of all Exchanges and non-Exchange 
entities for compliance with the standards established pursuant to 
Sec.  155.260. Section 155.280 is necessary because not all entities 
that are subject to Sec.  155.260 and Sec.  155.280 are currently 
covered under another single set of oversight regulations, such as 
HIPAA or State insurance regulations.
    HIPAA does not provide comprehensive safeguards because the 
privacy, security, and breach notification rules issued under HIPAA 
will not apply to all actors who are subject to Sec. Sec.  155.260 and 
155.280, or to all information that will be protected under those 
provisions. HIPAA requirements apply only to covered entities (defined 
under HIPAA as certain health care providers, health plans, health care 
clearinghouses, 45 CFR 160.103) and their business associates (defined 
under HIPAA generally as a person or entity who performs functions or 
activities on behalf of, or certain services for, a covered entity that 
involve the use or disclosure of protected health information (45 CFR 
160.103). The HIPAA Omnibus Final Rule (78 FR 5566, January 25, 2013) 
added to the definition of ``business associate'', a

[[Page 54083]]

subcontractor that creates, receives, maintains or transmits protected 
health information on behalf of a business associate).
    Similarly, State insurance regulations will not provide 
comprehensive safeguards because they do not apply to all entities 
subject to Sec. Sec.  155.260 and 155.280. State insurance regulations 
will vary from State to State and will often apply to agents, brokers, 
QHP issuers, and issuers of health plans.
    We recognize that Exchanges and non-Exchange entities may be 
subject to other regulations and oversight frameworks that are similar 
to the framework outlined in Sec. Sec.  155.260 and 155.280. However, 
we believe that Sec. Sec.  155.260 and 155.280 are necessary to 
safeguard the information that section 155.260 was implemented to 
protect. We intend to implement Sec.  155.280 without significantly 
increasing the burden on already regulated entities.
    Comment: Several commenters requested clarification on the 
definition of ``non-Exchange entities.'' One commenter was concerned 
that the definition for a non-Exchange entity was too broad. Another 
commenter requested that since QHP issuers are HIPAA covered entities 
and comply with HIPAA standards, they should not be included in the 
definition of non-Exchange entities under Sec.  155.260(b).
    Response: We intend to further clarify the scope of applicability 
of Sec.  155.260(b) in future rulemaking.
    Comment: Commenters raised points regarding the definitions for 
incident and breach established within proposed Sec. Sec.  
155.280(c)(1)(i) and 155.280(c)(1)(ii). The majority of comments noted 
that these definitions were different from what has been established 
for HIPAA, and raised concerns that this difference created the 
potential for conflicting standards. Additionally, there were comments 
regarding the breadth of the definitions and the types of events that 
would fall under each of the definitions, which generated a concern 
about administrative burden.
    Response: The definitions for incident and breach that we proposed 
to codify in this regulation have been included in the computer 
matching, information exchange and other data sharing agreements, as 
authorized under sections 1413(c) and 1413(d) of the Affordable Care 
Act. CMS has executed these agreements with other Federal agencies 
(Internal Revenue Service, Social Security Administration, Department 
of Homeland Security, Department of Defense and Veterans Health 
Administration, Office of Personnel Management, and Peace Corps), 
administering entities and State agencies (State Exchanges, Medicaid 
and CHIP agencies), and non-Exchange entities. In addition, the 
requirements regarding incident and breach management proposed in Sec.  
155.280(c)(2) are also included in the various data sharing agreements 
enumerated above. In these agreements, the definition for ``breach'' is 
taken from OMB's Memorandum on Safeguarding Against and Responding to 
the Breach of Personally Identifiable Information, dated May 22, 2007 
(OMB M-07-16), which provides guidance to Federal agencies for 
safeguarding against and responding to the breach of PII. The 
definition for ``incident'' is set forth by the Federal emergency 
response center, United States Computer Emergency Readiness Team (US-
CERT), and is derived from the definition of incident in the National 
Institute of Standards and Technology Special Publication 800-61, 
Revision 2, dated August 2012. US-CERT is used as the source of the 
definition, because the Federal Information Security Management Act of 
2002 (Pub. L. 107-347) requires Federal agencies to report incidents 
involving PII to US-CERT. We recognize that these definitions are based 
on Federal laws, regulations and guidance that typically do not extend 
to States. However, the information that State exchanges, State 
agencies, and non-Exchange entities will receive pursuant to their 
agreements with CMS is derived from Federal sources and requires 
safeguarding that complies with Federal standards. CMS acknowledges the 
volume of reports that is anticipated will be generated by these 
definitions and will continue to evaluate and analyze the definitions 
as the program evolves. Therefore, because uniform definitions for 
incident and breach and the requirements for incident or breach 
management have been included in all the data sharing agreements 
required under the Affordable Care Act, we are not finalizing the 
definitions for incident and breach nor the requirements for incident 
or breach management that we had proposed in Sec.  155.280(c)(1)(i), 
Sec.  155.280(c)(1)(ii), and Sec.  155.280(c)(2).
    Comment: We received many comments supporting the proposed 
regulation and requesting additional rulemaking to either increase 
transparency for the public at large, or further protect the PII of 
individuals applying for eligibility determinations and enrolling in 
insurance affordability programs as various individuals or entities 
(such as agents, brokers, Navigators, etc.) who provide assistance come 
into contact with the individual's information. To further increase 
transparency for the public, several commenters requested that CMS 
require the privacy and security practices established by either an FFE 
or State Exchange, which implement the requirements of Sec.  155.260, 
be made publicly available. One commenter recommended that the final 
rule should state explicitly that there is an incident handling 
protocol for the FFEs. There was also a request that Sec.  155.280 
ensure that consumers are informed when a security breach occurs that 
may affect them and their PII. Additionally, one commenter requested 
that annual summary reports be made public regarding the results of the 
audit and investigatory activities defined under Sec.  155.280(b).
    Response: With respect to requiring Exchanges to make privacy and 
security standards publicly available, CMS intends to publish the FFE 
privacy and security standards and encourages State Exchanges to 
publish their standards in an effort to increase transparency. In 
response to the comment requesting that the FFEs have an incident 
handling protocol, we note that the FFEs, as part of a CMS-run program, 
will follow the CMS incident handling protocol. Non-Exchange entities 
subject to the FFE privacy and security standards will be required 
through agreement with CMS to implement incident handling and breach 
notification procedures that are consistent with CMS' incident handling 
and breach notification procedures and will be required to memorialize 
them in the non-Exchange entity's own written policies and procedures.
    In response to the comment requesting that annual summary reports 
be made public, we anticipate future rulemaking related to oversight 
and monitoring of privacy and security as it relates to both Exchanges 
and non-Exchange entities, and will consider this comment at that time. 
Finally, in response to the comment requesting consumer notification 
when a security breach occurs, we note that the FFEs' incident handling 
procedures will require CMS to determine whether a risk of harm exists 
and if individuals need to be notified. State Exchanges would be 
expected to follow the breach notification laws for the State in which 
they operate.
    Comment: Many commenters were concerned that the requirement in 
proposed Sec.  155.280(c)(3) that all privacy and security incidents 
and breaches be reported to HHS within one hour of discovering the 
breach or incident was not practical or workable in the Exchange 
environment. Concerns were raised regarding the volume of the

[[Page 54084]]

reports the requirement would generate and whether over-reporting would 
undermine the ability to present a thoughtful, comprehensive plan of 
action and result in an overall lowering of the security visibility of 
the system.
    The commenters suggested a range of recommended alternatives to 
allow more flexibility in what was reported. Additional suggestions for 
alternatives from commenters included aligning the proposal with a 
variety of other Federal standards for reporting incidents such as the 
IRS standards, the Medicare two day standard, or HIPAA, which allows up 
to 60 days to publicly report an incident.
    A number of State Exchanges asked for clarification on what the 
reporting requirement meant in terms of their obligation to require 
adherence from the non-Exchange entities associated with their State 
Exchange. State Exchanges suggested that requirements for States should 
be set as part of the framework of the system security template 
developed by HHS.
    Response: Similar to our response to the comments regarding the 
definitions of incident and breach above, we note that the timeline for 
reporting privacy and security incidents and breaches that we proposed 
to codify in this regulation has also been included in the computer 
matching, information exchange and other data sharing agreements, as 
authorized under sections 1413(c) and 1413(d) of the Affordable Care 
Act. In addition, legal agreements executed pursuant to Sec.  
155.260(b) between CMS and non-Exchange entities required to comply 
with the privacy and security standards established and implemented by 
an FFE pursuant to Sec.  155.260 include the one hour timeframe for 
reporting all privacy and security incidents and breaches. Because the 
one hour incident response timeline has been included in all the data 
sharing agreements required under the Affordable Care Act, we have 
deleted the timing for incident reporting from regulation, proposed in 
Sec.  155.280(c)(3), and expect it to be addressed through separate 
agreement.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.280 of the 
proposed rule regarding oversight and monitoring of privacy and 
security requirements with the following modifications: To improve the 
precision of the language used, we are removing references to ``non-
Exchange entities associated with the Federally-facilitated Exchanges'' 
in Sec.  155.280(a) and are instead referring to these entities as 
``non-Exchange entities required to comply with the privacy and 
security standards established and implemented by a Federally-
facilitated Exchange pursuant to Sec.  155.260.'' Because these 
standards are included in other legal documents, we are not finalizing 
Sec. Sec.  155.280(c)(1)(i) and 155.280(c)(1)(ii), which would have 
defined the terms incident and breach; Sec.  155.280(c)(2) which would 
have required an entity where an incident or breach occurs to manage 
the incident or breach in accordance with the entity's documented 
incident handling and breach notification procedures; and Sec.  
155.280(c)(3), which would have required that incidents and breaches be 
reported within one hour of discovery.
4. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Eligibility Process (Sec.  155.310)
    In Sec.  155.310(k), we proposed a standardized process for 
handling applications that are submitted without information that is 
necessary for determining eligibility. We noted that we intended to 
work with States to implement these procedures and in 2014 to 
accommodate States with processes established for handling incomplete 
applications that did not match the process described in these 
regulations.
    Specifically, we proposed that if an application filer does not 
provide sufficient information on an application for the Exchange to 
conduct an eligibility determination for enrollment in a QHP through 
the Exchange, or for insurance affordability programs (if the 
application includes a request for an eligibility determination for 
insurance affordability programs), the Exchange would provide notice 
through the eligibility determination notice described in 45 CFR 
155.310(g). The notice would indicate that information necessary to 
complete an eligibility determination is missing, specify the missing 
information, and include instructions on how to provide the missing 
information.
    We proposed that the Exchange would provide the applicant with a 
period of no less than 15 days and no more than 90 days from the date 
this notice is sent to the applicant to provide the necessary 
information. Further, we proposed that during this period, the Exchange 
will not proceed with the applicant's eligibility determination or 
provide eligibility for enrollment in a QHP through the Exchange, 
advance payments of the premium tax credit, or cost-sharing reductions, 
unless an application filer has provided sufficient information to 
determine his or her eligibility for enrollment in a QHP through the 
Exchange, in which case the Exchange must make a determination for 
enrollment in a QHP through the Exchange.
    We sought comment on this proposal, including whether Exchange 
flexibility is appropriate; whether 15 days and 90 days are appropriate 
lower and upper limits; and whether additional language was needed to 
ensure coordination between the Exchange, Medicaid, and CHIP.
    Comment: Commenters were generally supportive of the flexibility 
offered regarding the timeline for handling incomplete applications 
through the Exchange. Some commenters suggested 15 days was too short 
of a timeframe and recommended a minimum initial timeframe of no less 
than 30 days to account for applicants who may need to turn to a third 
party for additional information or assistance. Some commenters 
suggested allowing the Exchange to proceed with the applicant's 
eligibility determination even if there is missing information in the 
application. One commenter suggested a timeframe of 30 to 45 days with 
the ability for individuals to request additional time for good cause. 
Another commenter recommended aligning the timeframe for incomplete 
applications with the 90 day inconsistency period. One commenter 
requested flexibility to use a shorter time period of 10 days to align 
with their current Medicaid program's response deadline.
    Response: We agree with commenters in support of maintaining 
flexibility in the timeframe for resolving incomplete applications. We 
also acknowledge that States may want to maintain a consistent 
timeframe across the Exchange and Medicaid and as such, we modify Sec.  
155.310(k) to set a lower limit of 10 days, rather than 15 days, to 
resolve an incomplete application in order to allow for this 
consistency. As indicated in the proposed rule, we intend to work with 
States to implement these procedures and in 2014 to accommodate States 
with processes established for handling incomplete applications that do 
not match the process described in these regulations.
    Comment: Several commenters suggested the date the incomplete 
application is received should be considered a protected filing date 
for enrollment, or create a special enrollment period such that 
individuals who submit an incomplete application during open enrollment 
and receive a final determination after open

[[Page 54085]]

enrollment ends could still select a plan and enroll in coverage.
    Some commenters raised concern that some employers may refuse to 
provide information to their employees or may significantly delay 
providing the necessary information to their employees, which could 
result in the employees having difficulty submitting complete 
applications, resulting in such individuals not being able to access 
advance payments of the premium tax credit or cost-sharing reductions, 
or to access them in a timely fashion.
    Commenters also suggested the transition relief provided to 
employers in 2014 with respect to the employer reporting and shared 
responsibility provisions under the Code may constrain the ability of 
employees to obtain information on employer-sponsored coverage needed 
to submit a complete application for insurance affordability programs.
    Response: We appreciate the suggestions from commenters regarding 
the date on which an incomplete application is received as a protected 
filing date and the suggestion to create a special enrollment period, 
for the purposes of plan selection outside the open enrollment period. 
We note that Exchanges retain authority to provide a special enrollment 
period to individuals who experience exceptional circumstances on a 
case-by-case basis as provided in 45 CFR 155.420(d)(9). We also note 
that the application date is used to establish the effective date of 
coverage in Medicaid, and this provision does not otherwise modify 
existing Medicaid rules regarding the relationship between the 
application filing date and the effective date of coverage.
    We continue to work closely with the Department of Labor to help 
educate employers about making information regarding employer-sponsored 
coverage they offer available to employees for the purpose of 
submitting an application for insurance affordability programs in a 
timely fashion. As part of the Administration's efforts to streamline 
employer efforts to educate their workforce and meet the requirements 
under section 18B of the Fair Labor Standards Act, as added by section 
1512 of the Affordable Care Act, on May 8, 2013, the Department of 
Labor released a model notice to help employers inform their employees 
of coverage options, which can be found at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf. Employers have the option of combining the employer 
coverage tool with the section 18B notice.
    Comment: One commenter supported the provision that requires the 
Exchange to determine eligibility for enrollment in a QHP through the 
Exchange if enough information is included in the application to do so. 
Another commenter raised concern that QHP eligibility without advance 
payments of the premium tax credit or cost-sharing reductions may be 
confusing for some individuals. Another commenter suggested that some 
applicants may not want to be responsible for full premiums while they 
are working to obtain the information needed to obtain an eligibility 
determination for advance payments of the premium tax credit. Another 
commenter suggested that enrollment in a QHP through the Exchange 
during the timeframe for incomplete applications should be optional.
    Response: It is important to have clear messages so individuals are 
informed of their financial responsibilities at the time of plan 
selection. The Exchange will provide actual premium information to 
consumers as part of the plan compare and select process, and consumers 
will be provided with this information again as a part of the premium 
payment process. While we believe it is important to provide 
individuals with the opportunity to enroll in a QHP through the 
Exchange if they are otherwise eligible, we acknowledge that some 
individuals may not want to purchase an unsubsidized QHP and we clarify 
that enrollment in a QHP is always optional and only occurs based on a 
consumer's choice, including when an application does not contain the 
information needed to make an eligibility determination for insurance 
affordability programs.
    Comment: One commenter suggested that in addition to the notice the 
Exchange sends to individuals who have an incomplete application, the 
Exchange be required to make a follow-up phone call to the application 
filer to attempt to complete the application. Another commenter 
suggested additional standards for handling incomplete applications, 
including that notices should include language that informs individuals 
that the Exchange will assist them in completing the application. The 
commenter suggested notices to applicants be provided in multiple 
languages and forms.
    Response: Follow-up by the Exchange could be helpful for consumers, 
although we believe that the Exchange should have flexibility to 
develop and implement the procedures that are most effective and 
efficient. Accordingly, we do not require an Exchange to take steps 
beyond what was proposed. However, we encourage Exchanges to explore 
the most effective and efficient approaches to reducing the number of 
incomplete applications and facilitating completion of incomplete 
applications, and share those best practices with other Exchanges. 
Additionally, we clarify that the notice described in Sec.  155.310(k) 
will follow the general standards for notices set forth in 45 CFR 
155.230, including accessibility requirements.
    Comment: One commenter recommended more clearly delineated, 
objective standards for determining whether or not an application is 
complete.
    Response: We note that an application is considered incomplete if 
information necessary for conducting an eligibility determination for 
enrollment in a QHP or for insurance affordability programs (if 
requested) is missing, and that these eligibility standards are 
described in subpart D of this part. We intend to provide instructions 
to inform individuals of the required and optional fields on the 
application, including ``help text'' on the dynamic online application, 
and believe these tools will help reduce the number of incomplete 
applications submitted to the Exchange.
    Comment: One commenter recommended that advance payments of the 
premium tax credit be applied prospectively from the date of 
eligibility for advance payments of the premium tax credit and not 
retroactive to eligibility determination for enrollment in a QHP 
through the Exchange.
    Response: We clarify that if an individual completes an application 
and requests an eligibility determination for insurance affordability 
programs, the effective date for advance payments of the premium tax 
credit is not retroactive, but follows the effective date policy 
outlined in 45 CFR 155.330(f).
Summary of Regulatory Changes
    We are finalizing the provisions in Sec.  155.310(k) as proposed 
with one minor modification. We modified paragraph (k)(2) to specify 
that the Exchange must provide the applicant with a period of no less 
than 10 days from the date on which the notice is sent to the applicant 
to provide the information needed to complete the application to the 
Exchange.
b. Verification of Eligibility for Minimum Essential Coverage Other 
Than Through an Eligible Employer-Sponsored Plan (Sec.  155.320)
    As finalized in the Exchange Establishment Rule, Sec.  155.320(b) 
specifies standards related to the verification of eligibility for 
minimum

[[Page 54086]]

essential coverage other than through an eligible employer-sponsored 
plan. We proposed to redesignate paragraph (b)(1) as (b)(1)(i) and 
(b)(2) as (b)(1)(ii) to consolidate the standards for Exchange 
responsibilities in connection with verification of eligibility for 
minimum essential coverage other than through an eligible employer-
sponsored plan. In paragraph (b)(1)(i), we also proposed to add the 
phrase ``for verification purposes'' to the end of existing text. We 
clarified that the Exchange would submit specific identifying 
information to HHS to compare applicant information with information 
from the Federal and State agencies or programs that provide 
information regarding eligibility for and enrollment in minimum 
essential coverage, including but not limited to the Veterans Health 
Administration, TRICARE, and Medicare.
    We noted that HHS will work with the appropriate Federal and State 
agencies to complete the appropriate computer matching agreements, data 
use agreements, and information exchange agreements which will comply 
with all appropriate Federal privacy and security laws and regulations. 
The information obtained from Federal and State agencies will be used 
and re-disclosed by HHS as part of the eligibility determination and 
information verification process set forth in subpart D of part 155.
    We noted that in connection with the proposal to redesignate 
paragraph (b)(2) to paragraph (b)(1)(ii), we did not propose any change 
to the text of the provision as previously finalized. Consistent with 
the authorizations for the disclosure of certain information under 42 
CFR 435.945(c) and Sec.  457.300(c), the proposed regulation provided 
for an Exchange to verify whether an applicant has already been 
determined eligible for coverage through Medicaid, CHIP, or the Basic 
Health Program, if applicable, using information obtained from the 
agencies administering such programs.
    Finally, we proposed to add paragraph (b)(2) to be consistent with 
45 CFR 164.512(k)(6)(i) and 45 CFR 155.270. We sought comment on this 
proposal.
    Comment: One commenter expressed support for the verification 
process outlined in Sec.  155.320(b). Another commenter raised concern 
that HHS has not described how verification information described in 
Sec.  155.320(b) will flow between the Exchange and QHPs and requested 
clarification that the Exchange will be responsible for reporting 
errors related to eligibility for minimum essential coverage and 
assuming any relevant financial liability that results from such an 
error.
    Response: The verification approach outlined in Sec.  155.320(b) 
does not provide for an information flow between the Exchange and QHPs. 
As stated in previous final rulemaking and also in the proposed rule, 
the Exchange would submit specific identifying information to HHS, HHS 
would return information from the Federal and State agencies or 
programs that provide eligibility and enrollment information regarding 
minimum essential coverage to the Exchange, and the Exchange would use 
this information to complete the verification as part of the 
application process.
Summary of Regulatory Changes
    We modify language in paragraph (b)(2) to clarify that the 
disclosure of information regarding eligibility and enrollment in a 
health plan is expressly authorized, for the purposes of verification 
of applicant eligibility for minimum essential coverage, as part of the 
eligibility determination process for advance payments of the premium 
tax credit or cost-sharing reductions. We note that this provision does 
not enable the disclosure by entities described in 45 CFR 
164.512(k)(6)(i) of clinical or other health records to the Exchange, 
as this information is not used in eligibility determinations for 
enrollment in a QHP through the Exchange or for insurance affordability 
programs.
c. Coordination With Medicaid, CHIP, the Basic Health Program, and the 
Pre-Existing Condition Insurance Plan (Sec.  155.345)
    As finalized in the Exchange Eligibility and Enrollment Rule,\8\ 
Sec.  155.345 specifies standards for coordination across insurance 
affordability programs. After adding a new paragraph (h) regarding the 
Exchange's adherence to a State decision regarding Medicaid and CHIP, 
we noted in the amendatory text that we re-designated previous 
paragraphs (h) and (i) as new paragraphs (i) and (j), but made a 
drafting error in failing to include these re-designated paragraphs as 
part of the revised regulation text. As such, we make a technical 
correction to include new paragraphs (i) and (j) as part of the 
regulation text. Furthermore, we make a technical correction in 
paragraph (i)(1) to change the cross-reference to Sec.  
155.320(b)(1)(ii) in order to align with the redesignation of Sec.  
155.320(b)(2) finalized in this regulation.
---------------------------------------------------------------------------

    \8\ 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 42160 (July 15, 2013).
---------------------------------------------------------------------------

Summary of Regulatory Changes
    We make a technical correction in Sec.  155.345 to clarify that 
paragraphs (i) and (j) are included as part of the regulation text, and 
make a technical correction in paragraph (i)(1) to change the cross-
reference to Sec.  155.320(b)(1)(ii) to align with the redesgination 
within Sec.  155.320(b).
5. Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans
a. Allowing Issuer Customer Service Representatives To Assist With 
Eligibility Applications (Sec.  155.415)
    We proposed to add Sec.  155.415 that would, at the Exchange's 
option and to the extent permitted by State law, permit issuer customer 
service representatives who do not meet the definition of agent or 
broker in Sec.  155.20 to assist qualified individuals in the 
individual market with: (a) applying for an eligibility determination 
or redetermination for coverage through the Exchange; (b) applying for 
insurance affordability programs; and (c) facilitating the selection of 
a QHP offered by the issuer represented by the customer service 
representative, provided that such issuer customer service 
representatives meet the proposed requirements set forth in Sec.  
156.1230(a)(2).
    We received the following comments concerning the proposed issuer 
customer service representatives provisions. As stated earlier in this 
preamble, for purposes of clarity, we will refer to ``issuer customer 
service representatives'' as ``issuer application assisters'' for the 
rest if this section.
    Comment: One commenter expressed concern regarding excluding agents 
and brokers from acting as issuer application assisters. The commenter 
indicated that certain States require an issuer application assister 
that assists in enrollment in a health plan to be a licensed agent 
under State law. We received another comment recommending that we 
continue to ensure that individuals involved with assisting applicants 
and enrollees comply with any existing State laws related to enrollment 
assistance. Another commenter recommended making application assisters 
a requirement for Exchanges. Lastly, we received a comment seeking to 
clarify issuer application assisters' rule in post-enrollment 
activities.
    Response: We introduced the term ``issuer customer service 
representative''

[[Page 54087]]

to allow individuals who are not licensed as agents or brokers, but 
employed or contracted by an issuer to assist applicants and enrollees 
with the application and enrollment process. Agents and brokers may 
also work for issuers, as many do today, but they must follow the 
standards set forth in Sec.  155.220. We note that, in some States, a 
license may be required to assist an applicant for applying for an 
eligibility determination or redetermination. We continue to defer to 
existing State laws related to enrollment assistance when deciding 
which individuals may assist applicants and enrollees. If State law 
requires a license to enroll applicants in coverage, then issuers would 
need to follow State law for licensure of application assisters.
    We note that there are certain functions that issuers currently 
have their staff perform, such as answering general information about 
plans, and we intend to allow those individuals to continue to perform 
those functions without meeting additional standards. Rather, if the 
issuer wants those individuals to perform additional functions outlined 
in this section, such as helping consumers as they apply for an 
eligibility determination, seek a redetermination for coverage through 
the Exchange, and apply for insurance affordability programs, those 
individuals will be considered issuer application assisters and be 
subject to the standards in section 156.1230(a)(2). Accordingly, we are 
not finalizing the language indicating that facilitating selection of a 
QHP would be a function of an issuer application assister. Rather, we 
are clarifying that it would be a typical function of issuer staff. 
Issuer staff would be able to perform post-eligibility functions such 
as plan compare and selection, if permitted by State law. However, the 
issuer staff would not be allowed to help QHP enrollees with reporting 
changes to an Exchange or be able to support them in the 
redetermination process. Those are functions of the issuer application 
assister, agent, broker, or other qualified assister.
    Comment: Several commenters stated it is essential that issuer 
application assisters who assist applicants and enrollees with 
applications and enrollment in QHPs do so without imposing 
discriminatory barriers to coverage. Accordingly, they have suggested 
adding nondiscrimination standards for issuer application assisters.
    Response: We note that Sec.  156.200(e) prohibits a QHP issuer, 
which includes issuer application assisters, from discriminating 
against an applicant. For this reason, we are not adding additional 
language on nondiscrimination standards.
    Comment: We received a comment seeking that the Exchange enforce 
parameters to ensure that information being provided by issuer 
application assisters is accurate. We also received several comments 
that issuers should be held responsible for any misconduct by their 
application assisters assisting applicants and enrollees with 
enrollment in addition to strengthening conflict of interest standards.
    Response: We plan to consider over time, based on experience with 
this function, whether more specific standards are needed in these 
regulations. Additionally, Sec.  156.1230(a)(2)(iii) of the final rule 
clarifies that issuer application assisters must comply with applicable 
State and Federal laws regarding conflicts of interest. We also note 
that the issuer should be monitoring its application assisters and that 
we believe the State DOI would act as the primary oversight source.
    Comment: One commenter expressed concern that an increase in issuer 
involvement would lead to a decrease in consumer protections. The 
commenter believed that issuer application assisters should only have 
access to consumer information needed to enroll a consumer in a QHP. A 
commenter expressed concern that application assisters could use PII 
obtained during intake to steer consumers to QHPs offered by other 
issuers. Another commenter wanted to clarify that issuer application 
assisters' compliance with FFE privacy and security requirements 
applies only to their FFE assistance activities. Additionally, 
commenters wanted clarity on whether information given to issuers 
during the application process could be stored in an issuer's database 
system. If so, commenters asked us to clarify whether that would be 
considered HIPAA PHI and those issuers would not be expected to create 
and maintain separate, FFE-established privacy and security policies 
and procedures for such data.
    Response: In the final rule at Sec.  156.1230(a)(2), we attempt to 
reduce administrative burden imposed by the proposed requirement for 
issuer application assisters to comply with the terms of an agreement 
between the issuer and the Exchange. We clarify that issuers need to 
ensure its application assisters follow the standards outlined in the 
proposed rule, but this would not be done through an agreement. The 
agreement in the proposed rule was not a privacy agreement and removing 
this agreement in no way weakens previously established agreements on 
standards for privacy and security for individuals accessing others 
PII. Issuers and their application assisters will still be subject to 
Exchange privacy and security standards, as well as all other 
applicable laws and regulations protecting consumer information, which 
may include, but is not limited to the HIPAA Privacy and Security 
Rules, as applicable. Issuers and their application assisters may only 
use Exchange application information for the purposes of, and to the 
extent necessary in, ensuring the efficient operation of the Exchange, 
including verifying the eligibility of an individual to enroll through 
an Exchange or to claim a premium tax credit or cost-sharing reduction 
or the amount of the credit or reduction; and may not disclose the 
information to any other person except as provided by applicable law or 
regulation in connection with those purposes.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.415 of the 
proposed rule, with a few modifications. For purposes of clarity, in 
finalizing this policy, we will use the term ``issuer application 
assisters'' in place of ``issuer customer service representatives'' to 
more clearly articulate the role of such individuals and, for 
consistency, will refer to the definition of ``issuer application 
assisters'' being finalized at Sec.  155.20. Accordingly, we are not 
finalizing the language indicating that facilitating selection of a QHP 
would be a function of issuer application assisters.
6. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
    This subpart was proposed to provide standards for eligibility 
appeals, including appeals of individual eligibility determinations and 
employer determinations as required by section 1411(f) of the 
Affordable Care Act, which makes clear that the Secretary will provide 
for an appeals process. We proposed to provide Exchanges with options 
for coordinated appeals to align with the options for eligibility 
determinations. In addition, we proposed standards for appeal requests, 
eligibility pending appeal, dismissals, informal resolution and hearing 
requirements, expedited appeals, appeal decisions, the appeal record, 
and corresponding provisions for employer appeals.
    Comment: We received many comments in support of subpart F and

[[Page 54088]]

the proposed eligibility appeals process and standards. Many commenters 
encouraged a streamlined, transparent, consumer-centric appeals 
process. In addition, we received comments in support of the proposed 
coordination measures with Medicaid and CHIP agencies and the due 
process protections afforded to appellants. Many comments reflected 
approval of the shared requirements between Exchange and Medicaid 
appeals, which commenters anticipate will ease the implementation of 
Exchange appeals and create efficiencies by having matching standards.
    Response: We provided a flexible, consumer-friendly process that 
limits the burden on consumers and Exchanges. We have also worked to 
develop a process that largely parallels the Medicaid fair hearing 
process and standards, including the requirements to provide notice of 
appeals procedures, access to the record, and robust due process and 
hearing rights. In the final rule, we generally maintain this approach 
while also adding additional flexibilities for Exchanges as they 
implement the eligibility appeals process.
    Comment: A few commenters, many representing States establishing 
Exchanges, encouraged HHS to provide additional flexibilities for 
implementation timelines in order to allow Exchanges time to establish 
and implement the appeals provisions. For example, one comment 
recommended a January 1, 2015 effective date to allow Exchanges, 
including the Federally-facilitated Exchange, more time to complete 
systems builds and update existing appeals processes to meet the 
standards proposed in the January 22, 2013 proposed rule. Another 
commenter noted that the proposed rule will require administrative 
changes including Medicaid State-plan amendments, State regulation 
changes, and significant system changes to support the new flow of 
electronic information between the Exchange and Medicaid. Commenters 
noted that it would be advantageous to have a longer period of time to 
ramp-up to meet the appeal requirements.
    Response: We have evaluated the provisions of the January 22, 2013 
proposed rule, and after consideration of the public comments received, 
in this final rule we are providing additional flexibility for 
Exchanges to implement a paper-based appeals process for the first year 
of operations (October 1, 2013 through December 31, 2014). We 
understand that many Exchanges have tight timeframes for system 
development and the paper-based process will allow Exchanges to operate 
the appeals process as current business requirements allow, while 
providing a timeline to modernize an appeal program. We have opted for 
this approach after balancing the interests of both appellants and 
Exchanges. This approach will assist Exchanges in setting up efficient, 
effective appeals processes that will positively impact appellants who 
use these processes; moreover, this flexibility does not abridge the 
rights of appellants provided in this rule and we do not anticipate 
that they will be materially adversely affected.
    We will continue to work with Exchanges to support their appeals 
implementation efforts and ensure successful coordination between all 
relevant entities administering insurance affordability programs and 
the appeals entities for such programs. We will also continue to 
provide guidance and technical assistance to Exchanges to promote and 
facilitate the sharing of experiences and best practices regarding the 
establishment and implementation of the eligibility appeals process.
    Comment: Several commenters desired greater clarity about which 
provisions apply to State Exchanges and which apply to Federally-
facilitated Exchanges or to State Partnership Exchanges, including 
determination and assessment eligibility models.
    Response: Unless specifically indicated in the rule, the standards 
we are finalizing apply equally to all Exchanges, or, where a 
requirement is specified to apply to the Exchange appeals entity, to 
all Exchange appeals entities, including the HHS appeals entity. We 
have attempted to keep the rules uniform whenever possible to provide a 
consumer-friendly, efficient process no matter what type of Exchange or 
appeals process is in place in a given State and to ensure that 
consumers are protected with a standard set of due process rights.
    Comment: Some commenters found the interplay between Medicaid and 
the Exchange cumbersome and difficult to follow in the proposed rules 
and requested the process be further simplified.
    Response: We developed an appeals process and standards that 
closely align with Medicaid fair hearing processes in hopes of allowing 
States to leverage existing appeals processes and simplify 
implementation. However, alignment was not possible in all cases due to 
different statutory requirements and operational considerations. In 
those instances, we attempted to provide standards that balanced 
consumer protections and process efficiencies. In developing the final 
rule, we have worked with the Center for Medicaid and CHIP Services 
(CMCS) to align or provide State flexibility where appropriate. We 
encourage States to provide questions to CMS about the rules and the 
interaction between Exchange and Medicaid appeals, so that we may 
provide further guidance, as appropriate.
    Comment: Another comment asked that we balance a consumer-friendly 
approach with a process that does not impose excessive administrative 
burden on administering agencies.
    Response: As noted above, we appreciate the effort and time it 
takes to build and operationalize a new appeals process. Where 
possible, our rules are aligned with existing Medicaid fair hearing 
standards to provide Exchange appeals entities and consumers a 
consistent, efficient process. In addition, we understand that many 
States will leverage existing appeals processes to provide Exchange 
appeals to limit the administrative burden and streamline processes as 
they implement Exchange appeals processes. Finally, we reiterate that 
Exchange appeals entities will be provided flexibility in the first 
year to provide a paper-based appeals process in order to complete 
system builds and incorporate modern technology.
    Comment: A few comments recommended that the appeals standards be 
specifically aligned with the due process protections set forth in 
Goldberg v. Kelly.\9\ Commenters highlighted that Goldberg's due 
process protections are extended to Medicaid beneficiaries and that, 
because of the close alignment and interplay between the Exchange and 
Medicaid programs, Exchange appeals should adopt the same standards.
---------------------------------------------------------------------------

    \9\ Goldberg v. Kelly, 397 U.S. 254 (1970).
---------------------------------------------------------------------------

    Response: As in the proposed rule, we have aligned the majority of 
our Exchange appeals provisions with existing or new Medicaid 
standards. Although we do not specifically cite to the Goldberg due 
process standards, the final rules provide comprehensive due process 
protections for appellants in the tradition of Medicaid fair hearings 
and Goldberg. We have closely analyzed specific comments submitted on 
the proposed due process standards and we have carefully designed these 
provisions to provide sufficient due process protections for appellants 
throughout the process.
    Comment: We received general comments recommending that we ensure 
that all notices and appeals processes comply with the applicable

[[Page 54089]]

non-discrimination laws, including section 1557 of the Affordable Care 
Act.
    Response: We note that the all Exchange processes, including the 
eligibility appeals processes, are required to comply with applicable 
non-discrimination laws, including section 1557 of the Affordable Care 
Act as specified in Sec.  155.120(c).
    Comment: A few commenters sought additional guidance on topics that 
were not covered in the proposed rule. For example, one sought guidance 
on appealing benefit and service coverage, including recourse to a 
Federal appeals process where appropriate. Another comment requested 
strong oversight and monitoring of the appeals process. Finally, 
another commenter requested training standards on appeals topics for 
consumer assistance entities.
    Response: These comments are outside the scope of this final rule 
and, therefore, we decline to address them here.
    Comment: One commenter expressed general concern over the proposed 
rule, related to the provisions requiring coordination between two 
separate programs, Medicaid and the Exchange, which are operated by two 
separate agencies. The commenter noted instances where the Exchange 
appeals rules appear to differ from what is allowed for Medicaid, 
including the reasons an appeal can be dismissed and the time to vacate 
a dismissal, and differences in certain timeframes. The commenter 
suggested that after a consumer completes the first level of the 
appeals process, the Medicaid and Exchange appeals process will 
diverge, regardless of the coordination option exercised by the State 
and that this will cause confusion.
    Response: We have addressed coordination of the two processes 
throughout the appeals provisions in the final rule, including in Sec.  
155.510. We also encourage States and consumers to review the Medicaid 
rules regarding appeals delegation authority at 42 CFR 431.10, 
431.205(b), 431.206(d) and (e), 431.240. We note that, depending on the 
operational configuration of the Exchange, including delegations 
regarding eligibility and the appeals process as noted above, the 
Exchange and Medicaid processes may be fully integrated, thereby 
optimizing the appellant experience. Even upon elevation of an appeal 
to the HHS appeals entity, Medicaid and Exchange issues may be reviewed 
together, although State agencies have the option to review the HHS 
appeals entity's application of Federal and State Medicaid law pursuant 
to 42 CFR 431.10(c)(3)(iii).
    Comment: We received one comment suggesting that calendar days 
should be changed to working days for deadlines that are less than five 
days throughout the rule.
    Response: The timelines established throughout the rule are set in 
terms of calendar days. As a result of modifications in this final rule 
to the proposed expedited appeals process in Sec.  155.540, the rule no 
longer contains timeline standards of less than five days.
    Comment: Several comments, particularly those from the issuer 
community, encouraged HHS to revisit timelines associated with the 
appeals process. For example, a few comments suggested that providing 
90 days to request an appeal, 90 days to issue a decision, 30 days to 
elevate a State Exchange appeals entity appeal decision to the HHS 
appeals entity, and 45 days for Medicaid to render a decision could 
result in a timeline of over 11 months, if all timeframes are fully 
exhausted. We were urged to explore alternatives to the proposed 
timeline that might reduce the length of the process.
    Response: We anticipate that very few appeals will fully exhaust 
all timeframes. Furthermore, we are modifying proposed Sec.  155.520 in 
this final rule to provide additional flexibility for State Exchanges 
to adjust the timeframe for accepting appeal requests, such that States 
may choose to implement a timeframe consistent with the State Medicaid 
agency's requirement for submitting fair hearing requests, provided 
that timeframe is no less than 30 days. This State option could help 
shorten the overall timeframe for an appeal in a State Exchange. We 
also note that although consumers will have a specific timeframe in 
which to request an appeal, many will submit appeal requests well 
before the expiration of the timeframe. In addition, informal 
resolution processes should assist in resolving appeals quickly, before 
the 90-day timeframe to issue an appeal decision closes. Finally, many 
appellants may be satisfied with the appeal decision made by a State 
Exchange appeals entity and not pursue the appeal with the HHS appeals 
entity. Therefore, apart from the modification to proposed Sec.  
155.520 to provide State flexibility for appeal request timeframes, we 
have maintained the majority of the other timeframes originally 
proposed and expect most appeals to be resolved without fully 
exhausting the maximum possible timeframe.
    Comment: One commenter requested that the relationship between the 
inconsistency period described in subpart D and appeals be described 
more clearly.
    Response: The inconsistency period is an important aspect of the 
eligibility process offering applicants and enrollees the opportunity 
to assist in the verification of eligibility information before 
receiving a final eligibility determination. Applicants and enrollees 
to whom an inconsistency period applies may only appeal upon the 
closure of that period when the applicant or enrollee receives a final 
eligibility determination. However, because the applicant or enrollee 
provides information directly to the Exchange during the inconsistency 
period, we anticipate that this process will help alleviate 
dissatisfaction with the final eligibility determination and, 
therefore, will reduce the volume of eligibility appeals that would 
otherwise be made, in the absence of an inconsistency process.
    Comment: We received a few general comments regarding notices. Some 
commenters recommended notices for the appeals process be simple, 
clearly written, and shared electronically. We also received a comment 
noting that many applicants and enrollees fail to report address 
changes, which increases the returned mail rate. The commenter 
recommended finalizing the rule with the option for States to eliminate 
paper notices at the consumer's option.
    Response: Notices must meet the standards established in Sec.  
155.230. We also note that Sec.  155.230(d) specifies that electronic 
notices must be provided at the individual's option but reiterate that 
a paper-based process, as discussed above, is acceptable for the first 
year of operations.
    Comment: We received several comments recommending that QHP issuers 
should be notified as to the status of an appeal at the same time an 
appeal entity sends a notice to an Exchange or an individual because an 
issuer will be affected if an enrollee enters the appeals process. For 
example, the commenter requested that issuers be notified at the time 
an appeal is acknowledged, dismissed, informally resolved, and when a 
decision has been made. One comment also specified that issuers should 
not be required to respond or otherwise acknowledge receipt of the 
notices, limiting the administrative burden on issuers and the 
Exchange.
    Response: We are finalizing the rule without providing notice to 
issuers throughout the appeals process. Although we acknowledge that 
issuers will be affected by various aspects of the appeals process, 
including whether an appellant qualifies for eligibility while

[[Page 54090]]

an appeal is pending and whether an appeal decision provides for 
retroactive enrollment, the communication mechanisms already 
established between the Exchange and issuers will be sufficient to 
accommodate issuers' needs for notification.
    Comment: One commenter expressed concern that there was minimal 
guidance within the proposed rule regarding coordination of modified 
adjusted gross income (MAGI) appeals with non-MAGI Medicaid appeals. 
The commenter suggested that HHS should require that appeals 
information included in MAGI determination notices clearly explain 
timeframes and processes for appealing MAGI decisions with respect to 
an individual whose eligibility is concurrently being determined, or 
who subsequently wishes to have his or her eligibility determined, on 
the basis of non-MAGI criteria for Medicaid eligibility; determinations 
on non-MAGI bases should explain the difference between appealing a 
MAGI versus non-MAGI eligibility decision, and clarify that only a 
Medicaid agency may hear a non-MAGI appeal.
    Response: The Medicaid eligibility contemplated as part of the 
Exchange appeals process is limited to MAGI-based Medicaid eligibility 
as described in Sec.  155.302(b). Non-MAGI Medicaid determinations will 
not be issued by the Exchange and, therefore, communications regarding 
those determinations will be handled by State Medicaid agencies. 
Exchange eligibility determination notices that involve eligibility for 
Medicaid based on MAGI will include information about an individual's 
option to apply for Medicaid benefits on a non-MAGI basis, including 
information about eligibility under the medically frail category. We 
encourage appeals entities to also include this information in appeal 
decisions, where applicable.
    Comment: We received a comment requesting clarification that all 
Medicaid appeals can be referred to the State for handling according to 
the State's existing processes, regardless of which entity made the 
eligibility determination. Similarly, the commenter requested 
clarification that all appeals related to the determination of 
eligibility or amounts of advance payments of the premium tax credit or 
cost-sharing reductions could be handled by HHS. The commenter proposed 
that the final rule be written in a way that allows States to have this 
flexibility and the commenter noted that individuals should have the 
opportunity to appeal a determination with the entity that ``owns'' the 
program in question.
    Response: The rules established in this final rule, in 45 CFR part 
155, subpart D, and at 42 CFR 431.10, 431.206(d) and (e), 431.240, 
435.907(h) and 457.340(a) provide flexibility for States to delegate 
authority to the Exchange to determine Medicaid and CHIP eligibility as 
well as make a separate delegation to the Exchange or HHS to hear 
eligibility appeals of those determinations. States may choose to 
delegate eligibility determinations and appeals to the Exchange or HHS, 
based on an individual State determination. Further, we note in 
response to the question above, that appeals of the advance payment of 
the premium tax credit and cost-sharing reductions can be heard by, or 
escalated to, the HHS appeals entity.
    The foregoing reflects general comments we received on the proposed 
rule or that discuss policies that have broad implications across the 
proposed appeals rules. Included below is a section by section 
discussion of the proposed regulations, and any modifications or 
amendments we are making to those proposed regulations in this final 
rule.
a. Definitions (Sec.  155.500)
    In Sec.  155.500, we proposed definitions for terms used in subpart 
F of part 155. Additionally, we proposed to incorporate terms defined 
in Sec.  155.20 and Sec.  155.300. The terms we proposed to define were 
``appeal record,'' ``appeal request,'' ``appeals entity,'' 
``appellant,'' ``de novo review,'' ``evidentiary hearing,'' and 
``vacate.''
    Comment: We received several comments that broadly supported HHS 
providing definitions for ``appeal record,'' ``appellant,'' ``de novo 
review,'' and ``evidentiary hearing.'' We similarly received several 
comments regarding the definition of ``appeal request.'' Most comments 
indicated approval for the inclusion of both oral and written 
expressions to indicate a request to have an eligibility determination 
or redetermination reviewed. However, one commenter requested that the 
definition of ``appeal request'' be narrowed to only written 
expressions to request an appeal or include oral expressions only at 
State option.
    Response: Defining these terms will assist Exchanges and consumers 
in clearly understanding the appeals process and standards laid out in 
subpart F. The ability to request an appeal orally is a factor that 
makes appeals more accessible to those who seek them. Many applicants 
and enrollees may not have easy access to computers to submit an 
electronic appeal request or otherwise may not be able to submit a 
written request. In addition, it is an important goal of the appeals 
process to provide methods for requesting an appeal that mirror the 
methods required for accepting Exchange applications, which includes 
both written and telephonic submissions. However, we understand the 
concern that accepting oral requests for an appeal may be burdensome to 
Exchange appeals entities that do not already provide this option as a 
means to appeal other public benefits determinations, and we discuss 
additional flexibilities related to this requirement for the first year 
of operations in the discussion of Sec.  155.520 in this final rule. We 
maintain the definition for ``appeal request'' in the final rule with 
both oral and written expressions to reflect the variety of 
possibilities for submitting an appeal request.
    Comment: We were asked in several comments to ensure that all 
actions that can be appealed are included in the definitions for 
``appeal request'' and ``appeal entity.'' Commenters were concerned 
that the proposed definitions were written too narrowly by only 
referencing specific notices rather than all actions that are 
appealable. In addition, one commenter recommended we also revisit 
Sec.  155.355 which, similar to subpart F's definitions, specifically 
cites notice provisions rather than broadly referring to the actions 
that are appealable.
    Response: In the proposed rule definitions for ``appeal request'' 
and ``appeals entity,'' we referenced determinations that are 
appealable by citing to the notices that accompany those appealable 
final determinations. We drew the connection to the determination 
notices rather than citing directly to the eligibility determinations 
in subparts D and G because the notice informs the individual of his or 
her determination, establishes that the determination is final, and 
communicates the right to appeal the determination. In addition, the 
original eligibility appeals provision in Sec.  155.355 similarly 
referenced the determination notices rather than the determination 
provisions directly. Thus, we continue to believe that our approach is 
appropriate, and we are finalizing the definitions as proposed in this 
regard.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.500 with the 
following modifications. We modified the definition of ``appeal 
request'' by

[[Page 54091]]

removing ``pursuant to future guidance on section 1311(d)(4)(H) of the 
Affordable Care Act'' and replaced it with ``Sec.  155.610(i).'' This 
change was made to update the reference to exemption determinations 
following the publication of the exemptions final rule issued on July 
1, 2013, codified at 45 CFR part 155, subpart G. We made a similar 
modification to the definition of ``appeals entity.'' We also made a 
minor modification to ``evidentiary hearing'' by removing ``new'' from 
the definition to clarify the scope of evidence that may be presented.
b. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we proposed the general standards for eligibility 
appeals. In paragraph (a), we proposed that the requirements of subpart 
F would apply to both State Exchange appeals processes and the HHS 
appeals process, except where otherwise specified. In paragraph (b), we 
proposed the scope of determinations that an applicant or enrollee may 
appeal, including initial determinations and redeterminations of 
eligibility made in accordance with 45 CFR part 155, subpart D; 
determinations for exemptions; or a failure by the Exchange to provide 
timely notice of an eligibility determination. Options for providing 
individual eligibility appeals processes were proposed in paragraph 
(c). We proposed that appeals may be provided by a State that elects to 
provide an appeals process or HHS, if a State elects not to provide a 
process or upon exhaustion of a State Exchange appeals process. In 
paragraph (d), we proposed standards for entities eligible to conduct 
eligibility appeals. Finally, in paragraphs (e) through (g), we 
proposed standards for appellant representation in an appeal, 
accessibility requirements for the appeals process, and the right to 
pursue judicial review to the extent it is available by law.
    Comment: We received comments supportive of broadly applying 
consistent appeals standards across eligibility appeals processes for 
the individual market, regardless of whether the appeals process is 
conducted by a State Exchange appeals entity or the HHS appeals entity.
    Response: We are finalizing the provisions of paragraph (a) without 
changes from the proposed rule in this regard. We intend the State 
Exchange appeals entity and the HHS appeals entity to be held to the 
same standards and meet the same requirements except where otherwise 
noted. We believe this consistency will provide for a smooth, 
transparent, consumer-friendly process.
    Comment: We received several comments that the right to appeal as 
proposed in paragraph (b) is too narrowly defined and may limit the 
issues or actions that can be appealed. Similar to the comments we 
received about Sec.  155.500 regarding the definitions for ``appeal 
request'' and ``appeals entity,'' some commenters expressed concern 
that, as proposed, paragraph (b) does not broadly apply appeal rights 
to all actions taken by the Exchange, Medicaid, or CHIP.
    Response: Paragraph (b) details the determinations and other 
circumstances that are appealable through the eligibility appeals 
process, including all initial determinations and redeterminations of 
eligibility as well as failure to take action on the part of the 
Exchange. We are finalizing paragraph (b) largely as it was proposed 
with some minor exceptions. In the text of paragraph (b), we are 
removing ``In accordance with Sec.  155.355 and future guidance on 
section 1311(d)(4)(H) of the Affordable Care Act.'' We have replaced 
the references to future guidance on exemption determinations in 
paragraphs (b)(2) and (3) to refer to the final rules published on July 
1, 2013, codified at 45 CFR part 155, subpart G 155.605 and 155.610(i), 
respectively. We also added new paragraph (b)(4) to clarify that a 
denial of a request to vacate dismissal made by a State Exchange 
appeals entity may be appealed.
    Comment: Commenters sought greater clarification as to the meaning 
of a ``failure by the Exchange to provide timely notice of an 
eligibility determination'' in (b)(3) and, specifically, what 
``timely'' means in this context.
    Response: The appeal right in Sec.  155.505(b)(3) is based on the 
requirement in Sec.  155.310(g) for Exchanges to provide timely written 
notice to an applicant of any eligibility determination made in 
accordance with subpart D. Because this provision does not define 
``timely,'' we also decline to do so in this final rule and are 
finalizing the provision as proposed.
    Comment: A comment requested clarification regarding appeals of 
Medicaid determinations through the Exchange appeals process. 
Specifically, the commenter questioned whether the Exchange appeals 
process would review other components of a Medicaid determination 
beyond the MAGI standard.
    Response: The Exchange appeals process for eligibility 
determinations does not include review of non-MAGI-based Medicaid 
eligibility determinations. Rather, the scope of the Exchange appeals 
process mirrors the scope of the Medicaid eligibility determination 
described in Sec.  155.305(c) which is limited to eligibility based on 
MAGI criteria. Non-MAGI-based Medicaid eligibility determinations will 
be provided directly by the State Medicaid agency, and appeals of these 
eligibility determinations must be adjudicated through procedures 
prescribed by the State Medicaid agency, not the Exchange appeals 
process.
    Comment: We received many comments in general support of the 
flexibility offered to State Exchanges to provide an individual 
eligibility appeals process or defer to the HHS appeals process.
    Response: Like the commenters, we anticipate the opportunity for a 
``local'' appeal is beneficial to both the Exchange that provided the 
eligibility determination and the appellant, who may find it easiest to 
work directly with the Exchange to resolve the issue. We are retaining 
this flexibility in the final rule with changes to provide greater 
clarity in response to the comments discussed below.
    Comment: Many commenters sought clarification regarding paragraph 
(c)'s proposed options and, specifically, which appeals processes may 
be delegated to HHS and which must be handled by State Exchanges. For 
example, commenters questioned whether HHS would review MAGI-based 
Medicaid and CHIP appeals, employer appeals, or SHOP appeals.
    Response: Paragraph (c) provides options for individual market 
eligibility appeals. Options for conducting employer and SHOP 
eligibility appeals are addressed and discussed in their respective 
sections, Sec.  155.555(b) and Sec.  155.740(b). In terms of individual 
eligibility determinations, we are finalizing the rule as proposed, 
providing State Exchanges the option to manage an eligibility appeals 
process that would hear appeals prior to the HHS appeals process (if an 
appellant elects to proceed to the HHS appeals entity), or to delegate 
the individual eligibility appeals function to the HHS appeals entity. 
A State Exchange's appeals process for individual eligibility 
determination would hear appeals of all the determinations listed in 
Sec.  155.505(b)(1)-(3), including Medicaid and CHIP eligibility 
determinations, except that a State Exchange appeals entity would not 
hear appeals of exemption eligibility determinations under Sec.  
155.605 and Sec.  155.610(i) if the Exchanges elects to delegate 
exemption appeals to the HHS appeals entity pursuant to paragraph 
(c)(2) of this

[[Page 54092]]

section, as described below. We are finalizing Sec.  155.505 with 
modification.
    Comment: Several commenters sought clarification as to whether some 
individual eligibility determination appeals could be delegated to HHS. 
For example, a commenter questioned whether a State Exchange could opt 
to provide an eligibility appeals process for all individual 
determinations except exemption appeals, which would be appealed 
directly to the HHS appeals process. Similarly, other commenters asked 
whether a State Exchange with its own eligibility appeals process could 
defer questions regarding verification of employer-sponsored coverage 
to the HHS appeals process if it is relying on HHS to perform 
verifications of employer-sponsored coverage.
    Response: We appreciate the need to clarify paragraph (c) with 
regard to which specific individual eligibility determinations may be 
delegated to the HHS appeals entity where a State Exchange appeals 
entity is also providing some individual eligibility appeals. In an 
efficient appeals process, the entity determining eligibility is, 
ideally, also the entity adjudicating an appeal of that determination. 
Therefore, we believe that it is more efficient for consumers in a 
State served by a State Exchange to appeal exemption determinations 
made by HHS directly to HHS, and to permit States to make this 
delegation to the HHS appeals entity. We are modifying paragraph (c) to 
provide this option.
    With regard to States choosing to rely on HHS to verify enrollment 
in coverage in an eligible employer-sponsored plan and eligibility for 
qualifying coverage in an eligible employer-sponsored plan, we refer 
commenters to Sec.  155.320(d), which provides standards for this 
process. We note that this option is available for eligibility 
determinations that are effective on or after January 1, 2015. Because 
this service will provide verification only and not a complete 
eligibility determination, states that establish a State Exchange 
appeals process will not be permitted to delegate appeals of this 
verification to the HHS appeals entity. The State Exchange appeals 
entity should treat the HHS verification as having conclusively 
established the appellant's enrollment in or eligibility for qualifying 
coverage in an eligible employer-sponsored plan as a matter of fact; if 
an appellant wishes to contest the HHS verification, he or she may do 
so by escalating the appeal. We are finalizing Sec.  155.505(c) as 
proposed in this regard.
    Comment: Some commenters sought additional details regarding the 
HHS appeals process, particularly following the exhaustion of a State 
Exchange appeal. For example, commenters wanted to understand the 
relationship and finality between a decision by a State Exchange 
appeals entity and a subsequent decision by the HHS appeals entity. 
This question was of particular importance in States where Medicaid 
appellants have additional avenues for State judicial review that may 
only be pursued within a specific window of time.
    Response: The State Exchange appeals entity decision is considered 
final and binding unless the appellant pursues the appeal through the 
HHS process, consistent with these final rules. If that occurs, the HHS 
appeals entity will review the appellant's case de novo, as specified 
in Sec.  155.535, and render a new decision. The decision of the HHS 
appeals entity is the final administrative decision in the matter, and 
is binding on all parties concerned.
    As provided in Sec.  155.505(g) of this final rule, appellants may 
seek judicial review to the extent it is available by law. We recognize 
that State law could provide for judicial review of State Exchange 
appeals entity decisions even where further administrative recourse to 
the HHS appeals entity is available to the appellant, and we clarify 
that nothing in this final rule precludes an appellant form pursuing 
any form of available judicial review. However, regardless of other 
avenues for obtaining review, if an appellant wishes to escalate a 
State Exchange appeals entity decision to the HHS appeals entity, the 
appellant must make that appeal request to HHS within 30 days of the 
date of the notice of the State Exchange appeals entity decision.
    Comment: We received a few comments recommending that applicants 
and enrollees should receive the same opportunities for initial and 
secondary appeals, regardless of whether the Exchange has its own 
appeals process. Another comment suggested giving appellants in State 
Exchanges with an eligibility appeals process the option to elect 
pursuing an appeal either through the State Exchange process or the HHS 
appeals process but not both processes. Finally, a commenter requested 
that appellants not be provided with the option to appeal to HHS after 
an SBE appeal and that HHS should not be able to override an SBE appeal 
decision.
    Response: We are finalizing Sec.  155.505(c) as proposed, providing 
access to the HHS appeals process to all appellants regardless of 
whether a State Exchange, State Partnership Exchange, or Federally-
facilitated Exchange is operating in their State, because section 
1411(f)(1) of the Affordable Care Act generally requires that Federal 
review of Exchange individual eligibility determinations be available 
to applicants and enrollees. We acknowledge that, because of the 
potential for review by a State Exchange appeals entity and the HHS 
appeals entity, some appellants will receive two levels of review while 
others will receive one; however, we believe all appellants, regardless 
of levels of review, will have access to a robust appeals process and 
comprehensive due process rights. Therefore, we believe Sec.  
155.505(c) provides an appropriate level of flexibility for Exchanges 
and appellants while fulfilling the requirement of section 1411(f)(1) 
of the Affordable Care Act that Federal review of Exchange individual 
eligibility decisions must generally be available to applicants and 
enrollees.
    Comment: One commenter requested that paragraph (c)(2) permit 
States to opt out of providing appellants a second-level appeal to the 
HHS appeals entity upon a showing that the State Exchange appeals 
entity provides comparable measures for administrative or judicial 
review at the State level. The commenter highlighted that introducing a 
new Federal level of appeals would necessitate changes to States' 
established review and appeals processes to accommodate the Federal 
review and introduce the potential for differing decisions at the State 
and Federal level. The commenter suggested that, to the extent that 
States have significant numbers of Medicaid-eligible individuals whose 
eligibility determinations are made outside of the Exchange, the 
Federal review requirement for Medicaid eligibility determinations made 
by the Exchange results in inconsistent treatment and potential 
confusion as to which procedural rights are available. Finally, we also 
received a comment that expressed the belief that HHS will not provide 
administrative review of appeals for all types of Exchange appeals, 
specifically Medicaid and CHIP determinations.
    Response: First, we clarify that the HHS appeals entity may 
adjudicate appeals of all types of eligibility determinations, 
including Medicaid and CHIP eligibility determinations where the 
relevant State agency has delegated appeals authority to the Exchange. 
Second, we share the concerns that State Exchanges have in establishing 
and coordinating Exchange appeals processes with existing appeals 
processes. As noted above, we are providing Exchanges additional 
flexibility in the first year of operations

[[Page 54093]]

to complete system builds, develop operating protocols, and establish 
secure electronic interfaces that align with the requirements of the 
final rule. Moreover, State Exchanges that do not wish to operate their 
own appeals process may delegate all individual eligibility appeals to 
the HHS appeals entity. In addition, we note that we have largely 
aligned appeals process requirements with the existing Medicaid fair 
hearing standards, and we have designed this final rule to minimize 
administrative and operational burdens to the greatest extent possible. 
State Exchanges are encouraged to leverage existing appeals processes 
and functions where possible to ease these burdens. However, we are 
unable to permit State Exchanges to opt out of providing appellants of 
individual eligibility decisions the opportunity to appeal to the HHS 
appeals entity because section 1411(f)(1) of the Affordable Care Act 
generally requires that Federal review be available to these 
individuals. Therefore, we are finalizing the provision as proposed.
    Comment: Commenters questioned whether Exchanges would face a cost 
for the appeals conducted by HHS, particularly State Exchanges that opt 
not to provide a State Exchange appeals process for individual 
eligibility appeals.
    Response: HHS does not intend to levy a fee for the costs 
associated with the adjudication of individual eligibility appeals from 
State Exchanges because HHS is required by section 1411(f)(1) of the 
Affordable Care Act to provide an appeals process.
    Comment: We received several comments requesting details on how HHS 
anticipates the escalation process from the State Exchange appeals 
entity to the HHS appeals entity will work, and what particular 
information HHS may need from a State Exchange in order to carry out an 
individual eligibility appeal.
    Response: We appreciate the concerns with the operational processes 
involved in adjudicating Exchange appeals and will address these 
technical issues in future guidance.
    Comment: We received several comments expressing general support 
for the provisions in paragraphs (d) through (f).
    Response: We have largely maintained these provisions as proposed. 
To the extent we are modifying the final provisions, we discuss those 
changes below.
    Comment: We received many comments regarding the standards for 
eligible entities under Sec.  155.505(d). Foremost, commenters wanted 
to know whether the flexibility offered to States Exchanges in 
paragraph (c) of this section to provide a State Exchange appeals 
process included the ability to delegate a State Exchange appeals 
process to an entity outside the Exchange. Comments in this vein 
included questions about delegation to non-governmental entities with 
CMS approval, State Medicaid or CHIP agencies, or a State's central 
administrative hearings office. We also received comments supporting 
the prohibition of delegation to entities that do not have demonstrated 
experience in making the types of determinations subject to appeal.
    Response: The proposed rule did not provide direct guidance on the 
Exchange's ability to delegate the appeals function, except to provide 
that an appeals process established under 45 CFR part 155, subpart D 
must comply with the requirements of 42 CFR 431.110(c)(2) for Medicaid 
eligibility appeals. However, we are making changes to provide greater 
clarity about this issue in the final rule at paragraphs (c) and (d) to 
explicitly allow delegation of individual eligibility appeals to an 
eligible entity where specific standards are met.
    We are modifying paragraph (c) by clarifying paragraph (c)(1) to 
state that the provision is applicable to the ``State Exchange appeals 
entity, or an eligible entity described in paragraph (d) of this 
section that is designated by the Exchange, if the Exchange establishes 
an appeals process in accordance with the requirements of this 
subpart.'' In paragraph (c)(2), we clarified the ability of an Exchange 
to delegate exemption appeals to the HHS appeals entity. Also in 
paragraph (c)(2), we are clarifying that appeals may be handled by the 
HHS appeals entity upon exhaustion of the State Exchange appeals 
process, if the Exchange has not established an appeals process in 
accordance with the requirements, or if the Exchange has delegated 
appeals of exemption determinations made by HHS pursuant to Sec.  
155.625(b) to the HHS appeals entity, and the appeal is limited to a 
determination of eligibility for an exemption.
    We are modifying paragraph (d) to remove references to the Medicaid 
standards and align standards for entities eligible to carry out 
Exchange functions under Sec.  155.110(a) because we do not want to 
further limit the ability for Exchanges to delegate functions to 
eligible entities. Inclusion of the Medicaid standard would prevent 
Exchanges from delegating appeals functions to non-governmental 
entities, whereas the Exchange standard that we have retained does not 
include this restriction. We think it is in the best interest of 
Exchanges to have this flexibility. This means that the entity must: 
(1) Be incorporated under and subject to the laws of one or more 
States, including State agencies; (2) must have demonstrated experience 
on a State or regional basis in the individual and small group health 
insurance markets and in benefits coverage; and (3) must not be a 
health insurance issuer, or a member of the same controlled group of 
corporations as or under common control with a health insurance issuer. 
We anticipate that many State Exchanges will delegate the individual 
eligibility appeals function to an eligible entity, such as the State 
Medicaid or CHIP agency or a central administrative hearings office 
within the State. An eligible entity may be a non-governmental entity. 
We interpret these requirements broadly and plan work with states that 
wish to delegate the individual eligibility appeals function to ensure 
that the designated entity satisfies these requirements.
    Comment: In response to paragraph (d), one commenter recommended 
that the rule specify that a State Exchange appeals entity can staff 
hearings with contract attorneys or other staff paid on a per-case or 
hourly basis rather than full-time Exchange staff.
    Response: We understand that some States may currently rely on 
contracted staff to assist with existing appeals processes and we 
acknowledge that staffing a new appeals process can be difficult when 
the volume of appeals is not yet known. We do not regulate the staffing 
of Exchange appeals entities in this final rule but we note that 
Exchange appeals process must meet the same standards provided in 
subpart B of Part 155 for the establishment of an Exchange, including 
Sec.  155.110 which allows the Exchange ``to enter into an agreement 
with an eligible entity to carry out one or more responsibilities of 
the Exchange.'' We are finalizing paragraph (d) without changes in this 
regard.
    Comment: We received general support for the provisions regarding 
the use of authorized representatives proposed in paragraph (e).
    Response: We are modifying the provision slightly to provide 
additional clarity. We have retitled the paragraph ``Representatives'' 
and clarified the language to state, ``An appellant may represent 
himself or herself, or be represented by an authorized representative 
under Sec.  155.227, or by legal counsel, a relative, a friend, or 
another spokesperson, during the

[[Page 54094]]

appeal.'' The modifications clarify the scope of representation and 
more closely parallel Medicaid standards in this regard.
    Comment: We received numerous comments supporting our accessibility 
standards for individuals with disabilities and limited English 
proficiency (LEP) individuals. Many of these commenters requested that 
we explicitly include such protections in other appeals provisions, 
apart from our specification of these protections in Sec.  155.505(f). 
Many commenters suggested including additional accessibility features 
and protections as part of the process. For example, several emphasized 
the need for notices and other communications to contain plain language 
for the process to remain accessible to appellants with special needs. 
We were encouraged to provide clearly written examples of notices and 
seek stakeholder input as materials are developed.
    Several commenters requested that the appeals process adopt the 
same requirements for accessibility for LEP individuals as are provided 
for Exchange programs and consumer assistance tools in Sec.  155.205, 
which includes provisions for oral interpretation, written translation, 
and taglines. In addition, particular accommodations for hearings were 
requested, such as providing appropriate augmentative or assistive 
communication devices for individuals with disabilities at no cost.
    Response: We appreciate the unique and vulnerable position that 
appellants with disabilities and LEP appellants face. For that reason, 
we proposed the requirement that all appeals processes be accessible to 
such individuals. We are finalizing the rule as proposed because the 
provisions of paragraph (f) are sufficient to safeguard against the 
concerns shared by the commenters, particularly because it applies to 
all parts of the appeals process.
    Comment: In response to paragraph (f), some commenters also 
requested that we ensure that any actions undertaken during the appeals 
process that do not comport with the accessibility standards must be 
voided and the process cease until cured. Similarly, some commenters 
recommended that only where meaningful notice has been given (e.g., in 
an LEP individual's preferred language or in an alternative format for 
an individual with a disability who cannot read regular print) should 
the notice, or any actions pursuant to it, be valid. The commenters 
viewed this approach as comporting with Title VI of the Civil Rights 
Act, the Rehabilitation Act of 1973, the Americans with Disabilities 
Act, and section 1557 of the Affordable Care Act.
    Response: Individuals with disabilities and LEP individuals whose 
distinct needs are not met during the appeals process are at risk for 
suffering adverse consequences. The value of an appeal is diminished 
where an appellant is unable to fully understand or participate in the 
process because of a failure on the part of the appeals entity to 
provide required accommodations. However, paragraph (f) and the 
associated statutory provisions noted by the commenters provide 
sufficient protection without the need to modify paragraph (f). 
Therefore, we are finalizing the provision as proposed.
    Comment: Several commenters requested various clarifications to the 
judicial review provision proposed in paragraph (g). Many commenters 
focused on clarifying in which court an Exchange appellant may seek 
judicial review. Other commenters focused on the operational aspects 
for seeking judicial review of an appeal decision by the HHS appeals 
entity. One commenter requested the final rules clarify that an 
appellant may either seek judicial review or an appeal to the HHS 
appeals entity, but not both. Another commenter highlighted the concern 
that States' laws often provide specific timeframes in which an 
individual may file a State judicial action and that these timeframes 
may not match up with the timeframe for seeking review of a State 
Exchange appeal decision by the HHS appeals entity and receiving an 
appeal decision. The commenter sought further clarification on the 
interaction between the State Exchange appeals process, the HHS review, 
and State judicial processes including when HHS review would commence 
relative to a State judicial review.
    Response: Section 1411(f)(1) of the Affordable Care Act generally 
requires that applicants and enrollees be afforded the opportunity to 
access a Federal administrative appeals process for individual Exchange 
eligibility appeals, without regard to the availability of judicial 
review. Accordingly, we are not implementing the commenter's suggestion 
that review by the HHS appeals entity and judicial review should be 
mutually exclusive. Additionally, State and Federal law regarding 
judicial review of administrative decisions generally require the 
exhaustion of available administrative remedies; accordingly, we do not 
expect judicial review of individual Exchange eligibility appeal 
decisions generally to be available before exhaustion of the 
administrative process, which provides for appeal to the HHS appeals 
entity. We encourage the commenters to research applicable State and 
Federal laws regarding judicial review of administrative decisions to 
determine under which circumstances appellants will have access to 
judicial review. We are finalizing the provision as proposed.
Summary of Regulatory Changes
    We are finalizing the provisions of Sec.  155.505 with 
modifications to several paragraphs. In paragraph Sec.  155.505(a) and 
throughout the provisions of final rule, we note that we have replaced 
``State-based'' with ``State Exchange'' for greater consistency across 
the Exchange rules. In Sec.  155.505(b), we streamlined the language by 
removing ``In accordance with Sec.  155.355 and future guidance on 
section 1311(d)(4)(H) of the Affordable Care Act.'' Additionally, we 
edited paragraph (b)(2) to remove ``with future guidance on exemptions 
pursuant to section 1311(d)(4)(H) of the Affordable Care Act'' and 
replaced it with a reference to Sec.  155.605. In Sec.  155.505(b)(3), 
we edited the provision to include the additional reference to the 
exemption determination notice by inserting, ``or Sec.  155.610(i)'' at 
the end of the provision. This addition reflects the finalization of 
the exemption rules in 45 CFR part 155, subpart G. Finally, we are 
adding new paragraph (b)(4) to state that ``[a] denial of a request to 
vacate dismissal made by a State Exchange appeals entity in accordance 
with Sec.  155.530(d)(2), made pursuant to paragraph (c)(2)(i) of this 
section'' may be appealed.
    We made a minor modification to paragraph (c)(1) to provide greater 
clarity that the provision is applicable to the ``State Exchange 
appeals entity, or an eligible entity described in paragraph (d) of 
this section that is designated by the Exchange, if the Exchange 
establishes an appeals process in accordance with the requirements of 
this subpart.'' We are similarly amending paragraph (c)(2) to read 
``[t]he HHS appeals entity'' rather than ``HHS.'' In paragraph (c)(2), 
we specifically provided the ability of an Exchange to delegate 
exemption appeals to the HHS appeals entity by separating the original 
language into two subparagraphs and adding a third subparagraph 
(c)(2)(iii), which reads, ``If the Exchange has delegated appeals of 
exemption determinations made by HHS pursuant to Sec.  155.625(b) to 
the HHS appeals entity, and the appeal is limited to a determination of 
eligibility for an exemption.''
    In paragraph (d), we amended the requirements that must be met by 
an

[[Page 54095]]

entity to be eligible to conduct individual eligibility appeals by 
removing reference to Medicaid standards at 42 CFR 431.10(c)(2) and 
replacing it with Exchange standards at Sec.  155.110(a). We also 
streamlined paragraph (d) by removing ``the requirements of.''
    In paragraph (e), we are modifying the proposed provision slightly 
to provide additional clarity. We are retitling Sec.  155.505(e) 
``Representatives'' and are modifying the provision to state, ``An 
appellant may represent himself or herself, or be represented by an 
authorized representative under Sec.  155.227, or by legal counsel, a 
relative, a friend, or another spokesperson, during the appeal.'' We 
are modifying the provision to clarify the scope of representation and 
more fully align with Medicaid standards in this regard.
c. Appeals Coordination (Sec.  155.510)
    In Sec.  155.510, we proposed coordination requirements between the 
Exchange appeals entity and agencies administering insurance 
affordability programs in order to minimize burden on appellants and 
ensure prompt issuance of appeal decisions. Included within this 
section are proposed requirements for agreements between the appeals 
entity or the Exchange and agencies administering insurance 
affordability programs regarding appeals as well as standards for 
coordination with Medicaid and CHIP appeals, including where the 
relevant State agencies have or have not delegated Medicaid or CHIP 
eligibility appeals authority to the Exchange appeals entity. We sought 
comment on options regarding when to inform the applicant or enrollee 
of his or her right to appeal to a denial of Medicaid or CHIP directly 
with the Medicaid or CHIP agency. Finally, paragraph (c) of this 
section proposed standards for data exchanges as part of the appeals 
process.
    Comment: Many commenters expressed support for paragraph (a), in 
which we proposed to require agreements between the Exchange appeals 
entity or the Exchange and agencies administering insurance 
affordability programs. Several commenters specifically expressed 
support for paragraph (a)(1), in which we proposed that the agreements 
minimize the burden on appellants in the appeals process. Some 
commenters also shared support for paragraph (a)(2), in which we 
proposed that the agreements ensure the prompt issuance of appeal 
decisions. Several commenters requested that the agreements be 
available to the public to promote accountability and transparency. We 
also received comment requesting that HHS make an agreement template 
available for State Exchanges to adopt or modify for State-specific 
circumstances. We received one comment recommending that the agreement 
explicitly provide for compliance with monitoring and reporting 
requirements and the specific information to be reported. Finally, we 
received comment on paragraph (a)(3) supporting the requirement that 
agreements comply with the Medicaid program's single State agency 
requirements.
    Response: In the proposed rule, we did not specify whether the 
agreements must be public and we are not finalizing this provision with 
any such modification. Similarly, in the proposed rule, we did not 
propose to require that the agreements include specific compliance with 
monitoring and reporting requirements, and we are not finalizing the 
provision with any such modification. We anticipate that appeals 
entities or Exchanges may wish to include those important issues in the 
agreements. Finally, we do not intend to provide a template for the 
agreements, but we may consider providing further guidance on this 
issue at a later date.
    Comment: Some commenters requested additional clarification 
regarding the respective roles of Medicaid and Exchanges in appeals.
    Response: In both the proposed rule and this final rule, CMS has 
worked to ensure that the roles of the Exchange and Medicaid in the 
eligibility appeals process are clear throughout the Exchange rules and 
the Medicaid rules. We also understand the desire to have a simple 
process for Exchanges to implement and appellants to use. We have 
provided the simplest, most coordinated options whenever possible.
    Comment: Subparagraph (b)(1) proposed that individuals who have 
been denied eligibility for Medicaid or CHIP be provided an opportunity 
to opt-in to having an appeal of that denial heard directly by the 
Medicaid or CHIP agency. We specifically sought comment as to when an 
individual should be notified of this option. Some commenters responded 
by endorsing an approach where the individual is informed at the time 
the eligibility determination is made by the Exchange because this 
option provides greater protection for individuals. We also received 
comment that the option for a hearing before the State agency could be 
offered during the Exchange appeal request. In addition, some 
commenters encouraged us to require that the information about opting-
in to a hearing before the State agency be provided in writing.
    Other commenters opposed the option entirely and instead supported 
allowing an appellant only one hearing at the Exchange. Similarly, a 
few commenters shared their concern that the option to appeal a denial 
of Medicaid, where the applicant or enrollee has been determined 
eligible for advance payments of the premium tax credit or cost-sharing 
reductions, is inefficient, costly, and will cause appellant confusion. 
These commenters requested that the provision be struck from the rule 
or that the decision to include the option for individuals to opt-in to 
a Medicaid fair hearing be left to the States.
    Response: We are required to provide applicants and enrollees the 
option to pursue an appeal of a denial of eligibility for Medicaid 
directly with the Medicaid agency in accordance with section 1902(a)(3) 
of the Social Security Act and 42 CFR 431.10(c)(1)(ii). We note that we 
are modifying the regulation text to remove reference to CHIP in this 
provision; the requirement to provide an appellant an opportunity to 
pursue a denial of eligibility with the State agency is only relevant 
to Medicaid denials. There is no corresponding requirement under 
Federal CHIP laws. In order to provide flexibility to Exchanges, we 
have elected not to include specific direction as to when and how 
notice of the option to have an appeal of a denial of Medicaid 
eligibility heard by the State agency must be provided to appellants, 
though we note that the notice, like Exchange notices generally, must 
comport with Sec.  155.230. We are finalizing the rule with the 
modification discussed above and also note that this provision has been 
relocated to Sec.  155.510(b)(1)(ii).
    Comment: We also received comments regarding how the opt-in policy 
should be operationalized. One commenter urged us to ensure that 
individuals who pursue an appeal of a denial of Medicaid eligibility 
with the Medicaid agency also have the option to request that the 
Medicaid hearing occur first to prevent any delays in coverage.
    Response: We are finalizing the rule as proposed, continuing to 
provide flexibility for an Exchange to determine how to operationalize 
the requirement to make a hearing before the State agency available to 
appellants appealing a denial of Medicaid eligibility. Exchanges and 
appeals entities may contact us for assistance in this area, as 
required.
    Comment: We received several comments about delegation of appeals 
authority. Some commenters expressed support for both the flexibility 
offered to States to delegate Medicaid and CHIP

[[Page 54096]]

appeals to the Exchange, thereby allowing States to offer one 
coordinated appeals process across all insurance affordability 
programs, as well as the option for State Medicaid and CHIP agencies to 
retain fair hearings at the State agency. We were asked to clarify that 
the delegation of appeals authority by a Medicaid or CHIP agency is 
separate from the delegation to determine Medicaid and CHIP 
eligibility. We were also asked to provide information on timeframes 
and information transfers where Medicaid and CHIP eligibility appeals 
authority is delegated, and where it is not. Some commenters also 
sought clarification as to how the proposed delegation provisions 
impact existing agreements of State Medicaid and CHIP agencies, 
including interagency agreements and vendor contracts.
    Response: State Medicaid and CHIP agencies have the flexibility to 
delegate authority to make eligibility decisions and, separately, to 
conduct eligibility appeals. The authority to delegate eligibility 
determinations is located in 42 CFR 431.10(c)(1)(i) and Sec.  457.1120 
for Medicaid and CHIP, respectively, and the authority to delegate 
eligibility appeals is located in 42 CFR 431.10(c)(1)(ii) and Sec.  
457.1120, respectively. We anticipate that many States may have an 
interest in delegating these two functions in tandem; however, we also 
acknowledge that States may wish to retain the appeals functions at the 
relevant State agency. More information on delegations by the Medicaid 
and CHIP agency can be found in the final rule published July 5, 2013 
(78 FR 42160). We are not providing additional guidance in this rule 
with regard to timeframes and data exchanges in the delegation context 
beyond what we have already addressed in this subpart in order to 
preserve flexibility for Exchanges in these areas. We also note that 
the provisions we are finalizing in Sec.  155.510 do not speak to 
existing agreements between State Medicaid and CHIP agencies.
    Comment: A few commenters shared support for the acknowledgement 
provided in paragraph (b)(2) that, even in cases where the Medicaid or 
CHIP agency has delegated appeals authority to the Exchange, the 
appellant may still opt to have a denial of Medicaid or CHIP 
eligibility heard by the Medicaid or CHIP agency. We also received 
comment expressing support for the requirement that where the Medicaid 
or CHIP agency has delegated appeals authority to the Exchange, the 
Exchange will issue a final, binding appeal decision, including 
regarding Medicaid or CHIP eligibility. Finally, one commenter 
questioned the use of ``may'' in subparagraph (b)(2), under which 
Exchange appeals entities may include in the appeal decision a 
determination of Medicaid and CHIP eligibility under specified 
conditions.
    Response: We appreciate the support the delegation provisions in 
paragraph (b)(2) received. We also agree that the use of ``may'' in the 
proposed provision was incorrect, and we are replacing that word with 
``must'' in this final rule. In addition, we are restructuring Sec.  
155.510(b) in this final rule to emphasize that the Exchange appeals 
entity will conduct delegated Medicaid and CHIP appeals in accordance 
with standards applicable to Medicaid and CHIP.
    Comment: We received support for the proposed provision in 
subparagraph (b)(2)(ii) proposing that notices required in connection 
with an eligibility determination for Medicaid or CHIP provided by the 
Exchange appeals entity align with the standards identified in subparts 
D and F, and by the State Medicaid or CHIP agency.
    Response: Maintaining the notice standards established by Medicaid 
and CHIP agencies is important when communicating with appellants about 
Medicaid or CHIP determinations. Therefore, we are finalizing this 
provision with minor clarifying modifications described below. As noted 
above, the provisions of Sec.  155.510(b) have also been restructured, 
and this provision is now located in clause (b)(1)(i)(B).
    Comment: In response to the proposed provisions of paragraph 
(b)(3), one commenter recommended a minor change to include reference 
to transmitting all ``relevant information'' as part of the ``initial 
application'' and appeal. The commenter also suggested the inclusion of 
a timeframe for transmitting the information.
    Response: We are finalizing the provision to provide that the 
appeals entity must transmit the eligibility determination and ``all 
relevant information provided as part of the initial application or 
appeal, if applicable.'' We decline to provide a more specific 
timeframe to preserve necessary administrative flexibility for 
Exchanges and appeals entities, and we anticipate that the Exchange and 
appeals entity will act in good faith to transmit such information 
promptly and without undue delay. As noted above, the provisions of 
Sec.  155.510(b) have also been restructured, and this provision is now 
located in paragraph (b)(2).
    Comment: We received many comments regarding paragraph (b)(4). A 
handful of commenters endorsed the proposed provision considering it 
efficient to treat an appellant determined or assessed as not 
potentially eligible for Medicaid or CHIP to be considered ineligible 
for those programs for purposes of determining eligibility for advance 
payments of the premium tax credit.
    We also received many comments urging HHS to reconsider this 
provision, as well as the treatment of an appeal of an eligibility 
determination for advance payments of the premium tax credit as an 
appeal of the eligibility determination for Medicaid and CHIP. Some 
commenters noted that many appellants may only be concerned with the 
tax credit, with no interest in or connection to Medicaid; these 
commenters feared that this linking of tax credits and Medicaid could 
create a burden on States to process appeals for individuals who 
clearly may not be eligible for Medicaid or may have been satisfied 
with the Medicaid eligibility determination. Some commenters suggested 
that the rules require the Exchange to offer the opportunity to file an 
appeal of any Medicaid denial, which would be less confusing to 
consumers. A few commenters suggested that, if this is not feasible, 
the requirement to treat an appeal of the denial of an eligibility 
determination for advance payments of the premium tax credit as an 
appeal of eligibility for Medicaid and CHIP should be delayed until 
Jan. 1, 2015. Some commenters felt strongly that this ``automatic 
appeal'' will cause agencies to expend significant resources to process 
appeals that are neither intended nor desired by the appellant.
    Response: We are finalizing paragraph (b)(4) as paragraph (b)(3) as 
part of the restructuring of Sec.  155.510(b). While we acknowledge the 
commenters' concerns regarding the pairing of Medicaid and CHIP appeals 
with appeals concerning advance payments of the premium tax credit, our 
goal is to provide a streamlined, coordinated appeals process for 
appellants, while minimizing the administrative burden on the Exchange, 
appeals entity, and State Medicaid and CHIP agencies. We believe our 
approach accomplishes this goal and we are finalizing the provision as 
proposed.
    Comment: We received one comment regarding the standards for data 
exchange proposed in paragraph (c). The commenter was supportive of 
paragraph (c) serving as a goal for modernizing appeals processes 
through the use of electronic interfaces but expressed concern that the 
appeals systems would not be sufficiently

[[Page 54097]]

developed to accommodate electronic interfaces upon initial open 
enrollment. The commenter recommended a phased-in approach to 
establishing a secure electronic interface between the Exchange, 
Exchange appeals entities, and other insurance affordability programs.
    Response: We understand that many Exchange appeals entities may 
lack the system functionality for secure electronic data exchanges in 
current system builds for the first year of operations. Instead, 
Exchange appeals entities may utilize a secure, paper-based process for 
exchanging data and information that conforms to information privacy 
and security standards incorporated in Sec.  155.510(c)(1) for the 
first year of operation.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.510 with the 
following modifications. In Sec.  155.510(a)(3), we deleted ``42 CFR 
431.10(d)'' and added two new subparagraphs, (a)(3)(i) and (ii). New 
subparagraph (a)(3)(i) refers to Medicaid standards for delegating 
appeals authority to the Exchange or HHS, stating, ``42 CFR 431.10(d), 
if the State Medicaid agency delegates authority to hear fair hearings 
under Sec.  431.10(c)(ii) to the Exchange appeals entity.'' New 
subparagraph (a)(3)(ii) refers to CHIP standards for delegating appeals 
authority to the Exchange or HHS, stating, ``42 CFR 457.348(b), if the 
State CHIP agency delegates authority to review appeals under Sec.  
457.1120 to the Exchange appeals entity.''
    We restructured Sec.  155.510(b) and made minor modifications 
throughout. We have moved the requirements formerly in (b)(2), with 
minor changes to (b)(1), which now contains two subparagraphs. Thus, 
Sec.  155.510(b)(1) and (b)(1)(i) provide, ``Where the Medicaid or CHIP 
agency has delegated appeals authority to the Exchange appeals entity 
consistent with 42 CFR 431.10(c)(1)(ii) or Sec.  457.1120, and the 
Exchange appeals entity has accepted such delegation--[t]he Exchange 
appeals entity will conduct the appeal in accordance with'' the 
standards identified in new clauses (A) and (B), namely, ``Medicaid and 
CHIP MAGI-based income standards and standards for citizenship and 
immigration status, in accordance with the eligibility and verification 
rules and procedures, consistent with 42 CFR parts 435 and 457'' and 
``Notice standards identified in this subpart, subpart D, and by the 
State Medicaid or CHIP agency, consistent with applicable law .'' We 
have moved the opt-in provision previously located in Sec.  
155.510(b)(1) to Sec.  155.510(b)(1)(ii), and we have made a minor 
modification to remove references to CHIP, as the opt-in policy does 
not apply to denials of CHIP eligibility. We also clarified ``the 
appellant'' as ``the appellant who has been determined ineligible for 
Medicaid'' and we have added ``eligibility'' before ``determination.''
    We are finalizing proposed Sec.  155.510(b)(3), with modification, 
at Sec.  155.510(b)(2). In this paragraph, we are replacing ``appeal'' 
with ``initial application or appeal, if applicable'' and we are adding 
the word ``relevant'' before ``information.'' We are finalizing 
proposed Sec.  155.510(b)(4) at Sec.  155.510(b)(3) without 
modification. Finally, in Sec.  155.510(c)(1), we updated the citation 
from Sec.  155.345(h) to Sec.  155.345(i) to accurately reference the 
current location of the relevant data exchange requirements.
d. Notice of Appeal Procedures (Sec.  155.515)
    In Sec.  155.515, we proposed standards for providing notice of 
appeal procedures at both the time of application and in the 
eligibility determination notice. This section also proposed the 
content of that notice.
    Comment: Many commenters showed support for the notice of appeal 
procedures provisions in Sec.  155.515. We received several comments 
requesting a modification to paragraph (a) to require that the notice 
of appeal rights be provided in writing.
    Response: In the proposed rule, we did not explicitly state that 
the notice of appeals procedures must be provided in writing; however, 
the requirement in paragraph (a) states that the appeals language 
appear within specific eligibility notices, including eligibility 
determination notices, redetermination notices as a result of a mid-
year change or annual redetermination, and exemption determination 
notices. The notice provisions specified in paragraph (a) specifically 
require the notice to be written, and Sec.  155.230(a) generally 
requires that any notice sent by an Exchange to applicants, qualified 
individuals, enrollees, and others must be written. Therefore, it is 
not necessary for Sec.  155.515(a) to reiterate the requirement that 
the notice of appeals procedures be provided in writing.
    Comment: Regarding paragraph (b), one commenter sought 
clarification regarding the meaning of paragraph (b)(5), in which we 
proposed to require the notice of appeals procedures to contain an 
explanation that an appeal decision may result in redetermination for 
other household members. Another commenter requested the language 
provide more certainty regarding whether or not an appeal would result 
in a redetermination for other household members.
    Response: During an appeal, appellants have the opportunity to 
submit information to be considered by the appeals entity. In addition, 
the appeals entity will reexamine the information used to make the 
eligibility determination. In some cases, the appeals entity will find 
the eligibility determination was incorrect or that information, newly 
supplied by the appellant, will result in a change to the original 
determination. Such changes, particularly those that impact household 
income information, may require an eligibility redetermination for all 
household members whose own eligibility was determined by reference to 
the changed information. The requirement in paragraph (b)(5) is 
intended to alert individuals that an eligibility appeal by one 
household member may impact the eligibility of other household members. 
We agree with the commenter that the language used in paragraph (b)(5) 
calls for greater clarity regarding whether other household members' 
eligibility will be redetermined as a result of a change in an 
eligibility determination as a result of an appeal by one household 
member. Therefore, we are finalizing this provision with minor 
modification to clarify that an appeal decision for one household 
member may result in a change in eligibility for other household 
members and such changes will be handled as a redetermination of 
eligibility for all household members in accordance with the standards 
specified in Sec.  155.305.
    Comment: We received comments requesting information as to how 
Sec.  155.515 interacts with the general standards for Exchange notices 
found in Sec.  155.230 and whether the notices specified in part 155 
subpart F would include the content required by Sec.  155.230.
    Response: Section 155.515 provides specific requirements regarding 
when notice of appeal rights and procedures must be provided to 
individuals and what content that notice must include. Section 155.230 
provides general standards for Exchange notices, which includes the 
notices described in subpart F. Thus, notices under subpart F must meet 
the requirements of Sec.  155.230, such as providing contract 
information for customer service resources, identifying the regulation 
supporting the action, and conforming to accessibility standards.

[[Page 54098]]

    However, we note that the notice under Sec.  155.515 does not 
necessarily require a free-standing notice. The requirements of Sec.  
155.515 may be met by providing the required content (notice of appeal 
rights and procedures) within another notice. For example, the notice 
of appeal rights and procedures may be included within the eligibility 
determination notice and does not need to be issued in a separate 
notice. The requirements of Sec.  155.230 are applicable to any notice 
in which the content required by Sec.  155.515 (notice of appeal rights 
and procedures) is included.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.515 of the 
proposed rule with the following modifications. We are making a minor 
modification to paragraph (a)(2) to include reference to the exemption 
eligibility determination notice under Sec.  155.610(i). We are 
modifying paragraph (b)(5) to make the provision mandatory rather than 
permissive. We have replaced ``may be handled'' with ``will be 
handled'' to clarify that the notice of appeal procedures must contain 
an explanation that an appeal decision for one household member may 
result in a change in eligibility for other household members and such 
a change will be handled as a redetermination. We also added ``that 
such a change'' and ``of eligibility for all household members'' to the 
provision.
e. Appeal Requests (Sec.  155.520)
    In Sec.  155.520, we proposed the modes through which the Exchange 
and appeals entity must accept appeal requests, including requests 
submitted by telephone, by mail, in-person (as applicable), and via the 
internet. Additionally, we proposed the Exchange and appeals entity 
must allow an applicant or enrollee to request an appeal within 90 days 
of the date of the eligibility determination notice or 30 days from the 
date of a State Exchange appeals entity's notice of appeal decision. We 
further proposed the requirement to issue a notice acknowledging the 
receipt of a valid appeal request and requirements to obtain and 
transmit information concerning the appeal upon receipt of an appeals 
request, and confirm receipt of this information. Finally, we proposed 
that appellants must be notified of invalid appeal requests and may 
submit amended appeal requests.
    Comment: Many commenters expressed broad support for the 
flexibilities we proposed Sec.  155.520 to allow appellants several 
methods to request an appeal. However, many States commented with 
concern that accommodating all of the appeal request modes would be 
burdensome and require significant administrative updates to systems 
and staffing levels. Telephonic appeal requests were highlighted as 
particularly problematic. Many States' Medicaid agencies are not 
currently set up to accept telephonic appeal requests and, therefore, 
do not have the sophisticated voicemail systems, record keeping 
protocols, and staff training to accommodate telephonic appeal 
requests. Similarly, commenters viewed requesting an appeal via the 
Internet as another mode that would require significant systems 
development to ensure appeal requests and supporting documentation are 
captured and transmitted properly. We also received many comments 
seeking an expansion of the modes allowed to request an appeal to 
include via email, fax, text, and other commonly available electronic 
means.
    Several commenters expressed concern over the implementation of the 
proposed appeal request modes and supported allowing additional time 
for Exchange appeals entities to implement these provisions. For 
example, one comment suggested that accepting appeal requests via 
internet in the initial year will create a large burden on Exchange 
appeals entities because system builds and testing schedules are 
already tight. Some commenters encouraged us to consider implementing 
the appeal request methods under a delayed timeframe or, alternatively, 
eliminating the requirement from the rule altogether.
    Response: The proposed rule proposed to require an Exchange and 
appeals entity to accept appeal requests through a variety of modes in 
an effort to match the avenues through which an application for 
Exchange coverage can be submitted. The modes include via telephone, 
mail, in person (as applicable), or via the Internet. In addition, the 
proposed rule proposed to offer flexibility for Exchange appeals 
entities to provide an in-person route to request an appeal only if the 
Exchange or the appeals entity were capable of receiving in-person 
requests, assuming that some Exchanges and appeals entities might not 
have a wide geographic physical presence. We note that the rules of 
subpart F do not apply to Medicaid agencies, except insofar as a State 
may delegate Exchange appeals to a State Medicaid agency. We are 
finalizing this provision as proposed but reiterate that a paper-based 
process, as discussed above, is acceptable for the first year of 
operations. All other appeal request modes may be provided at the 
Exchange appeals entity's option until the second year of operations.
    Comment: We received comments requesting that the rule include the 
requirement that Exchanges must accept requests for appeals in 
languages other than English. It was noted that without such a 
requirement, Exchanges may create a barrier to filing an appeal that 
would result in discrimination.
    Response: As noted above, we consider the provisions for 
accessibility in Sec.  155.505(f) to be sufficient protection to LEP 
individuals and individuals with disabilities. We intend for Exchanges 
and appeals entities to make accommodations for these individuals so 
that the appeals process is accessible to all applicants and enrollees. 
Although we are not altering the provisions of Sec.  155.520 in this 
regard, we note that appellants to the HHS appeals process will be able 
to submit appeal requests in languages other than English. Finally, we 
note that we have made a minor modification to paragraph (a)(2), 
changing ``may'' to ``must'' to require the Exchange and the appeals 
entity to assist the applicant or enrollee in making the appeal 
request, ``if requested,'' as an extra protection for applicants and 
enrollees who may require assistance.
    Comment: Many commenters provided general support for the 90-day 
timeline to request an appeal. However, other commenters also shared 
significant concern about the timing and sequencing of appeal requests 
and decisions and the potential length of the appeals process. For 
example, some commenters expressed concern that Medicaid and Exchanges 
have different timelines for requesting an appeal. Specifically, 
certain State Medicaid Agencies have shorter time periods during which 
an individual can submit an appeal request, whereas the Exchange 
proposes a 90-day timeframe. A few commenters recommended limiting the 
amount of time to request an appeal to 30 days. Other commenters noted 
a 90-day request period could leave some appellants who have been 
denied eligibility without coverage for several months, if the appeal 
originates in a State Exchange appeals process and escalates through 
the HHS appeals process.
    Response: We are finalizing the provision in paragraph (b) with a 
modification regarding the 90-day timeframe. We understand that State 
Medicaid and CHIP agencies may elect to set timeframes for requesting 
an appeal shorter than 90 days and that a State may want to leverage 
existing appeals processes and infrastructure within the State to 
provide Exchange

[[Page 54099]]

eligibility appeals or otherwise align Exchange and Medicaid appeal 
processes. Therefore, we are modifying the provision to provide a 
choice: the Exchange and appeals entity must either allow an applicant 
or enrollee to request an appeal within 90 days or within a timeframe 
consistent with the State Medicaid agency's requirement for submitting 
fair hearing requests, provided that the timeframe is no less than 30 
days, measured from the date of the notice of eligibility 
determination. If a State agency delegates appeals authority to HHS, 
HHS will provide an applicant or enrollee with 90 days to request an 
appeal, in accordance with the proposed timeframe.
    Comment: Many commenters expressed support for the proposed 
provision in Sec.  155.520(c). However, we also received support for a 
longer timeframe for elevating an appeal decision of a State Exchange 
appeals entity to the HHS appeals entity. Suggested timeframes range 
from 60 days to 90 days (the latter in order to keep the timeframe 
uniform with the initial appeal request).
    Response: We are finalizing the provision in Sec.  155.520(c) as 
proposed without extending the timeframe to request an appeal before 
the HHS appeals entity following exhaustion of the State Exchange 
appeals process. We consider 30 days to be a fair balance between 
providing the appellant sufficient time to determine whether to elevate 
his or her appeal and avoiding delay of the resolution of the appeal, 
and implementation of the appeal decision.
    Comment: We also received comment noting that the proposed rule is 
silent about the interaction of State law and the timeline for 
escalating an appeal decision of a State Exchange appeals entity to the 
HHS appeals entity. For example, some States currently provide an 
opportunity for administrative or judicial reconsideration of a State 
administrative hearing decision but only within a specific timeframe, 
and it was not clear in the proposed rule how this timeframe might 
interact with the timeframe for elevating an appeal to the HHS process.
    Response: We are aware that State law may provide appellants 
additional avenues for review, beyond escalating their appeal to the 
HHS appeals entity as provided in this final rule, including the 
opportunity to request further State administrative or judicial review. 
Such alternative for State-level review follow State-specific 
timeframes and rules, which makes it challenging to provide a Federal 
process (as generally required for individual Exchange eligibility 
appeals by section 1411(f)(1) of the Affordable Care Act) that will 
seamlessly integrate with all States' existing rules and procedures. 
Recognizing the regulatory limitations in this area, the procedure for 
escalating of an appeal to the HHS appeals entity does not preclude an 
appellant from seeking other avenues for review that may be available 
under State law. However, appellants should be mindful of the 30-day 
timeframe for escalating a State Exchange appeals entity decision to 
the HHS appeals entity, as this period will not be stayed while an 
appellant pursues alternative State law avenues for review. If the 
appellant does request an appeal with HHS, the HHS appeals entity will 
review the appellant's case de novo, as specified in Sec.  155.535(f), 
and render a new decision that will constitute the final administrative 
decision.
    Comment: We received a few comments regarding the use of ``timely'' 
and ``prompt'' in several proposed provisions, with some commenters 
suggesting the substitution of a specific timeframe, such as two 
business days, with the expectation that relevant action would be taken 
sooner, if possible.
    Response: We understand the benefits specific timeframes can 
provide for appeals entities, including providing a clear window during 
which actions should be completed to provide appropriate protections 
for appellant rights. However, we also anticipate that appeals entities 
may require flexibility in some cases due to operational 
considerations. The Exchange rules sometimes provide timing 
requirements that allow a reasonable amount of flexibility, such as 
``promptly,'' ``without undue delay,'' and ``timely'' for many 
transactions that occur between administering agencies. The 
transactions that are required in Sec.  155.520 between appeals 
entities, Exchanges, insurance affordability programs, and HHS can 
benefit from a reasonable degree of flexibility, and therefore, we are 
finalizing the provisions as proposed in this regard and note that this 
is applicable to similar requirements in the employer and SHOP appeals 
sections below.
    Comment: A few commenters noted that implementing the requirement 
to provide a notice acknowledging the receipt of an appeal request 
creates administrative burden and expense. One comment viewed the 
acknowledgement notice as duplicative of the notice of hearing found in 
Sec.  155.535(b), which the commenter thought acted sufficiently as an 
acknowledgement of receipt. We received comment that electronic appeal 
requests should provide confirmation of receipt automatically and, if 
the individual prefers to request an appeal in writing, he or she 
should send the request by certified mail with a return receipt 
requested as a means to confirm the receipt of the request.
    Response: The notices required by the rule, including the appeal 
request acknowledgment notice, communicate important information to the 
appellant that a certified mail return receipt cannot provide. First, 
the acknowledgment confirms that the appeal has been accepted and not 
dismissed. Second, it informs the appellant of his or her qualification 
for eligibility while the appeal is pending. Third, the notice 
reiterates that any advance payments of the premium tax credit accepted 
while an appeal is pending are subject to reconciliation. Additionally, 
appeals entities may wish to include other information about the 
appeals process or frequently asked questions to assist the appellant 
with the process. We disagree with the assertion that the 
acknowledgement notice duplicates Sec.  155.535(b)'s notice of hearing 
because, while State Exchanges have the option to provide an informal 
resolution process, pre-hearing, we anticipate that most appeals 
entities will implement such a process in order to resolve appeals as 
efficiently and expeditiously as possible. Only those appellants who 
remain dissatisfied with the informal resolution outcome will then 
receive the notice of hearing; accordingly, the acknowledgement of 
appeal requests is not duplicative of the notice of hearing. We are 
finalizing the provision as proposed in this regard.
    Comment: We received comment questioning the utility of providing a 
transcript, recording, or summary of the State Exchange appeal under 
paragraph (d)(4) when the HHS appeals entity will be reviewing the 
appeal de novo.
    Response: We note that paragraph (d)(4) requires the transmission 
of the appeal record to the HHS appeals entity when an appellant 
elevates his or her appeal from a State Exchange appeals entity. The 
appeal record, as defined in Sec.  155.500, includes information beyond 
the transcript of the State Exchange appeals entity hearing. We include 
this requirement to lessen the burden on an appellant who is elevating 
his or her appeal to provide duplicative information, consistent with 
Sec.  155.510. In addition, the transmission will include the 
information used to make the appellant's initial eligibility 
determination, which the HHS appeals entity otherwise would not 
possess. Finally, the transmission of the State Exchange appeals 
entity's appeal

[[Page 54100]]

decision and record will include evidence presented during the appeal, 
including at hearing. Therefore, we are finalizing the provision as 
proposed in this regard.
    Comment: We received comments supportive of the proposed provision 
that an applicant or enrollee may cure an invalid appeal request. In 
addition, several commenters requested that the proposed requirement in 
paragraph (d)(2)(i) regarding the written notice of the ``invalid'' 
appeal request inform the applicant or enrollee that he or she can cure 
the defect and resubmit the appeal again as long as the new appeal 
request meets the timeliness requirement in this section.
    Response: In addition to protecting applicants' and enrollees' due 
process rights, the ability for an applicant or enrollee to cure an 
invalid appeal request within the 90-day timeframe will decrease 
dismissals and, subsequently, requests to vacate dismissals, which in 
turn should lessen the burden on appeals entities overall. To that end, 
we agree that the notice informing an individual that he or she 
submitted an invalid appeal request should also include an explanation 
that he or she may cure the defect and resubmit the request within the 
appropriate timeframe. We anticipate that the more informed an 
individual is of the appeals process and of the next steps applicable 
to him or her, the less time and resources the appeals entity will 
spend per appeal. We are modifying the proposed provision to include 
the requirement that the applicant or enrollee be informed that he or 
she can cure the defect and resubmit the appeal request within the 
applicable timeframe.
    We note that we view this provision as a tool to clearly define for 
appeals entities how to handle appeal requests that are out of scope, 
untimely, or submitted improperly. We clarify the intent of this 
provision is to address these instances and provide a method for an 
individual to resubmit the request or, if resubmission is not possible 
because the amended appeal request would be untimely, a method to 
request the appeals entity review the dismissal of the appeal request. 
The provision is not intended to prevent or limit the acceptance of 
appeal requests for minor technical deficiencies, such as an appeal 
request that is missing a phone number or does not state why the 
individual is appealing with exacting precision. We intend that only 
more fundamental deficiencies should make an appeal request invalid, 
such as where an applicant is seeking to appeal a coverage claim rather 
than an eligibility determination.
    Comment: We received one comment regarding the interaction of the 
acknowledgement of appeal request, the ability to cure an invalid 
appeal request, and the dismissal of an invalid appeal. The commenter 
found the provisions to be contradictory and suggested that they can 
only be reconciled if there is a time limit upon the right to amend an 
invalid appeal request under Sec.  155.520(d)(2)(ii). Absent such a 
deadline, the commenter thought an appeals entity that issued a notice 
of a defective appeal request will not know when it can comply with its 
obligation to dismiss the appeal for being invalid under Sec.  
155.530(a)(3) without violating its obligation to allow an appellant to 
cure a defective appeal request. The commenter suggested that HHS 
either permit the appeals entity to impose a reasonable deadline for 
amendment or establish a uniform deadline of 15 days after service of 
notice under Sec.  155.520(d)(2)(i).
    Response: The proposed rule proposed to require that the appeals 
entity accept an amended appeal request only if the amended request met 
``the requirements of this section [155.520],'' including the timing 
requirements in Sec.  155.520(b) or (c), as applicable. However, we 
agree with the commenter that an invalid appeal request submitted 
toward the end of the 90-day appeal request timeframe would pose a 
timing issue in terms of informing the individual that he or she may 
cure the defect and dismissing the appeal because it does not comport 
with the requirements of a valid appeal request. We have revised Sec.  
155.520(d)(2)(i)(C) to provide appeals entities the flexibility to 
impose a reasonable deadline for amending appeal requests.
    Comment: We received comment requesting that we clarify which data 
elements and date ranges encompass an ``eligibility record'' as 
described in paragraph (d)(3)(ii).
    Response: The eligibility record is critical in the adjudication of 
an appeal because it will contain the information the appeals entity 
will need to make an accurate appeal decision. We are finalizing the 
definition of ``appeal record'' in Sec.  155.500, and we refer the 
commenter to that definition.
    Comment: The proposed regulations establish a requirement that an 
Exchange must transmit the appeal record and eligibility record via 
secure electronic interface. However, one commenter noted that some 
Exchanges and Medicaid agencies will share a single, electronic 
eligibility system; therefore, there is nothing to transmit as both 
entities have access to the single system that holds all the relevant 
information. The commenter requested that the final language be amended 
to recognize integrated State systems.
    Response: We recognize that States may take advantage of the 
flexibility we are providing to structure interactions between the 
agencies administering the Exchange and the State Medicaid program in 
different ways. Moreover, we recognize that State agencies 
administering the Exchange and the State Medicaid program will be 
operating with various information technology systems, and some States 
may feature an integrated system that serves both the Exchange and 
Medicaid (such as where the same agency administers the Exchange and 
the State Medicaid program). However, even where this integration 
exists, it is critical that the components responsible for eligibility 
determinations and appeals communicate and are granted access to the 
appropriate information. Therefore, we decline to modify the proposed 
rule, although we clarify that transmission of information is not 
necessary when both the eligibility entity and the appeals entity share 
access to systems that store the relevant information.
    Comment: A commenter inquired whether HHS plans to require State 
Exchange appeals entities to transmit the appeal record to HHS 
exclusively through the Hub?
    Response: We will work closely with State Exchange appeals entities 
to establish a secure, efficient mechanism for exchanging data.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.520 of the 
proposed rule with the following modifications. Regarding paragraph 
(a), we are modifying the provision by changing the ``or'' preceding 
Sec.  155.520(a)(1)(v) to ``and,'' and the permissive ``[m]ay'' to 
``[m]ust'' in Sec.  155.520(a)(2).
    In Sec.  155.520(b), we are adding a new provision to allow State 
Exchanges to provide a timeframe for requesting an appeal consistent 
with the State Medicaid agency's requirements for submitting a fair 
hearing request. Specifically, we are adding a new paragraph at (b)(2) 
stating that the Exchange and the appeals entity must allow an 
applicant or enrollee to request an appeal within, ``[a] timeframe 
consistent with the State Medicaid agency's requirement for submitting 
fair hearing requests, provided that timeframe is no less than 30 days, 
measured from the date of the notice of eligibility determination.'' In 
paragraph

[[Page 54101]]

(c), we are adding language to provide that an appeal may be requested 
at the HHS appeals entity within 30 days of the date of a State 
Exchange appeals entity's notice of appeal decision ``or notice of 
denial to vacate a dismissal.''
    In paragraph (d)(1), we are amending the provision by inserting 
``must'' preceding subparagraph (d)(1)(i), and removing the word from 
subparagraphs (d)(1)(i) and (d)(1)(ii). In subparagraph (d)(2)(i), we 
added clauses to more clearly explain what is required of the appeals 
entity when it receives an invalid appeal request. We placed the 
requirement to inform the appellant that his or her appeal request has 
not been accepted, which was proposed in the proposed rule, in clause 
(d)(2)(i)(A). Similarly, we placed the requirement to inform the 
appellant about the nature of the defect in the appeal request, which 
was proposed in the proposed rule, in clause (d)(2)(i)(B). Finally, we 
added clause (d)(2)(i)(C) to include a new requirement that the appeals 
entity include an explanation ``[t]hat the applicant or enrollee may 
cure the defect and resubmit the appeal request by the date determined 
under paragraph (b) or (c) of this section, as applicable, or within a 
reasonable timeframe established by the appeals entity.'' This new 
provision addresses situations in which an appellant submits an invalid 
appeal request near the end of the timeframe to request an appeal, 
which would pose a timing issue in terms of providing the individual 
with an opportunity to cure the defect, and provides Exchange appeals 
entities the flexibility to impose a reasonable deadline for amending 
appeal requests.
f. Eligibility Pending Appeal (Sec.  155.525)
    In Sec.  155.525, we proposed the standards by which certain 
appellants may receive benefits while an appeal is pending. We proposed 
that the Exchange, or Medicaid or CHIP, as applicable, must continue to 
consider an individual eligible if he or she is appealing a 
redetermination, consistent with the standards proposed in Sec.  
155.525 or as determined by the Medicaid or CHIP agency, as applicable. 
Regarding eligibility for enrollment in a QHP through the Exchange, 
advance payments of the premium tax credit, and cost-sharing 
reductions, we proposed that an appellant or tax payer who accepted 
eligibility pending appeal should be pended eligibility in accordance 
with the level of eligibility in effect immediately before the 
redetermination being appealed.
    Comment: Several commenters expressed support for the provisions 
providing eligibility pending appeal. Although a few commenters thought 
it would be advantageous for new applicants to receive eligibility 
pending appeal, especially if the applicant receives eligibility during 
the inconsistency period, these commenters also noted the 
justifications for not doing so. Specifically, these commenters 
highlighted the difference between pending benefits for those 
completely new to coverage as opposed to those who had been enrolled 
and were redetermined ineligible; for example, enrollees have an 
existing relationship with an issuer and can be pended in the coverage 
they already receive while new applicants must being a relationship 
with an issuer and newly enroll in coverage to obtain pended benefits. 
These commenters also thought it should be made clear that, after the 
inconsistency period has ended, the applicant's eligibility will be 
determined, and the applicant will be eligible to receive the 
determined level of eligibility while an appeal is pending. For 
example, if an applicant entered an inconsistency period after 
submitting an application to the Exchange and, during that 
inconsistency period, was determined eligible for advance payments of 
the premium tax credit, these commenters thought we should clarify that 
this individual would qualify for eligibility pending appeal if the 
individual appealed his or her eligibility determination.
    Response: We are finalizing the provision as proposed. Because new 
applicants who receive an eligibility determination notice under Sec.  
155.310(g) that they are eligible for enrollment in a QHP through the 
Exchange, advance payments of the premium tax credit, cost-sharing 
reductions, or Medicaid or CHIP, may remain in coverage while they 
appeal that determination, it is not necessary to provide these 
individuals with eligibility pending appeal. In accordance with our 
proposed policy, we will not extend pended eligibility to new 
applicants who are denied eligibility, either outright upon initial 
application or at the close of an inconsistency period. It is not a 
common practice to provide pended benefits to new applicants who are 
not currently receiving benefits and we model that policy in our final 
rule.
    Comment: A few commenters requested that appellants be explicitly 
informed of the potential for reconciliation of advance payments of the 
premium tax credit when accepting eligibility pending appeal and that 
pended eligibility may be waived. One commenter suggested that 
confirmation that the appellant understands the potential tax liability 
associated with benefits pending appeal be part of the initial appeal 
request. Finally, we received comment that pended benefits should be an 
elected option, not an automatic benefit. Therefore, in the example, 
the individual could opt to appeal without receiving eligibility while 
the appeal is pending.
    Response: We share the concerns of commenters regarding the choices 
appellants must make regarding pended benefits. We noted in the 
proposed rule's preamble at 78 FR 4651 that subpart D's Sec.  
155.310(d)(2) states that the Exchange must permit an individual to 
accept less than the maximum advance payment of the premium tax credit 
for which the tax filer is determined eligible; this includes accepting 
none of the advance payment of the premium tax credit. We also noted 
that receipt of advance payments of the premium tax credit are subject 
to reconciliation. To illustrate using the example from the previous 
comment-response: If the individual receives advance payments of the 
premium tax credit while the appeal is pending, those payments would be 
subject to IRS reconciliation after the close of the tax year, and the 
individual could be liable to repay tax credits received on an advance 
basis for which the IRS determines the individual was not eligible (the 
individual could also receive a tax refund if the IRS determines that 
he or she was eligible for a larger premium tax credit).
    We agree that the proposed regulation language did not state that 
receipt of pended eligibility is at the option of the appellant and are 
modifying the text of Sec.  155.525(b) in the final rule to require 
that pended eligibility must be continued only if the tax filer or 
appellant accepts eligibility pending the appeal. Our intent is to 
ensure that appellants receive the choice to accept pended eligibility 
and that the Exchange does not pend eligibility that will include 
advance payments of the premium tax credit unless the tax filer 
affirmatively elects to receive them during the appeal. We agree that 
tax filers must be notified that receipt of advance payments of the 
premium tax credit is subject to reconciliation; however, we decline to 
add specific language to Sec.  155.525 because informing individuals of 
this information is already required by Sec.  155.310(d)(2)(ii).
    Comment: A few commenters noted the proposed provision's 
relationship with Medicaid and CHIP. Commenters noted a discrepancy 
between Medicaid and Exchange pended eligibility rules in that, unlike 
Medicaid, the Exchange does not limit pended eligibility to those 
appellants who request it within

[[Page 54102]]

10 days of an appealable action. In Medicaid, an appeal must be 
requested within 10 days of the action, and benefits continue until the 
end of the 10-day period to ensure there is no break in coverage if a 
beneficiary requests an appeal during the 10-day period. Under the 
Exchange provision, the decision to terminate advance payments of the 
premium tax credit and cost-sharing reductions could have been 
effectuated by the time the individual requests an appeal. We also 
received comment questioning why Medicaid and CHIP are referenced in 
the proposed provision when the provision applies to annual or mid-year 
redeterminations conducted by Exchanges; the commenter noted that once 
an individual is determined eligible for Medicaid, the Medicaid agency 
will control the case and conduct redeterminations. Finally, one 
commenter sought clarification of the pended eligibility policy where a 
redetermination is initiated in Medicaid, which results in a Medicaid 
denial, and then the account is transferred to the Exchange for an 
eligibility determination, which also results in a denial. The 
commenter questioned which benefits the appellant would receive while 
the appeal is pending. The commenter expressed concern that the State 
would not have a mechanism to audit and verify when Exchange appeals 
are completed if the appellant is supposed to receive Medicaid benefits 
while the appeal is pending.
    Response: We have coordinated the Exchange appeals provisions with 
the Medicaid fair hearing rules whenever possible. However, we 
determined that it would be in the best interest of appellants to 
provide a pended benefits policy that does not incorporate a window in 
which an appellant must request pended benefits that is shorter than 
the overall timeframe for requesting an appeal. Therefore, we offer 
pended benefits on appeal of a redetermination, regardless of when the 
appellant requests the appeal within the 90-day appeal request 
timeframe and we are finalizing the provision as proposed in this 
regard. We included reference to Medicaid and CHIP because our rules 
provide flexibility for States to choose to fully integrate Exchange 
and Medicaid and CHIP operations, and we wanted to highlight that, in 
such situations, Medicaid and CHIP-specific rules must still be 
followed where applicable.
    We appreciate the comment seeking greater clarity on the approach 
for handling pended benefits when a redetermination of Medicaid 
eligibility results in a denial and the transfer of the account to the 
Exchange, where eligibility to purchase a QHP through the Exchange and/
or for advance payments of the premium tax credit and cost-sharing 
reductions is also denied. This comment highlights the intersection of 
the Exchange and Medicaid rules. In a situation where a Medicaid 
recipient is ineligible for Medicaid upon redetermination, the 
individual is afforded appeal rights with the State Medicaid agency and 
the State Medicaid agency's rules for pended eligibility apply. When 
the State Medicaid agency transfers the individual's account to the 
Exchange to determine eligibility for enrollment in a QHP through the 
Exchange, advance payments of the premium tax credit, and cost-sharing 
reductions, the Exchange must determine the individual's eligibility as 
an initial application. If the individual is determined ineligible to 
participate in the Exchange or for Exchange insurance affordability 
programs, the individual is generally afforded appeal rights through 
the Exchange. However, the individual would not be eligible for pended 
benefits from the Exchange, as initial applicants to the Exchange are 
not eligible for pended benefits during appeal. We understand that not 
all States will delegate authority for Medicaid and CHIP eligibility 
determinations and appeals similarly and, therefore, States may have a 
variety of questions about how the intersection of Exchange and 
Medicaid and CHIP appeals policies impacts their specific State 
arrangement. We encourage States to contact us so that we can address 
questions as they relate to each State's delegation choices.
    Comment: One commenter noted that, depending on how the pended 
eligibility provisions are administered, individuals might be permitted 
to migrate between different QHPs during an appeal, or in and out of 
Medicaid or CHIP coverage, which would not be in the best interest of 
individuals and might serve to undermine the goal of the provision. The 
commenter expressed concern that this could lead to an appellant 
experiencing discontinuity of coverage and could create administrative 
challenges for any the issuers involved. The commenter urged HHS to 
consider placing additional parameters around the provisions of Sec.  
155.525 to avoid unnecessary discontinuities in coverage.
    Response: Receiving eligibility while an appeal is pending does not 
provide an individual with an unchecked ability to enroll in new 
coverage or make changes to existing coverage. Enrollment is regulated 
by the provisions of subpart E.
    Comment: Many of the comments we received regarding pended 
eligibility during an appeal related to how such a benefit would be 
implemented. Commenters expressed concern for the operational aspects 
of the proposed provision. For example, we received a comment 
recommending that pended benefits should not be implemented until after 
the appellant has paid his or her portion of the coverage premium, 
including any retroactive payments for pended eligibility in cases 
where an appellant's pended eligibility is not immediately implemented 
at the time of the appeal request and must be retroactively 
implemented; for example, where there is some delay because the tax 
filer must decide whether to accept pended eligibility that includes 
advance payments of the premium tax credit. Similarly, a commenter 
questioned how non-payment of premiums affects pended eligibility and 
recommended that QHP issuers be allowed to proceed with a non-payment 
termination regardless of an individual's pended status.
    Response: Pended eligibility is a status that we intend for the 
Exchange, or Medicaid or CHIP, as applicable, to implement when the 
appeals entity indicates the appellant qualifies for it and the 
appellant or tax filer, as applicable, has accepted it. However, for an 
appellant who is pended eligibility to receive coverage, the appellant 
must enroll in coverage and pay premiums, as would any other enrollee. 
Consequently, if an individual receives pended eligibility, enrolls in 
coverage, but fails to pay premiums, the issuer may terminate coverage 
as provided in Sec.  155.430(b)(2)(ii).
    Comment: We received one comment expressing concern that the timing 
and sequencing of pended eligibility will lead to applicants and 
enrollees with overlapping program eligibility, such as simultaneous 
eligibility for Medicaid and for Exchange insurance affordability 
programs, which will result in confusion about payment 
responsibilities. The commenter requested that HHS issue guidance about 
how costs and payment of services will be handled when overlapping 
program eligibility occurs.
    Response: We do not share the commenter's concern that pended 
eligibility will lead to overlapping program eligibility. Individuals 
can never qualify for Medicaid and advance payments of the premium tax 
credit or cost-sharing reductions simultaneously. Section 
155.305(f)(1)(ii)(B) establishes that advance payments of the premium

[[Page 54103]]

tax credit and cost-sharing reductions are not available to support the 
purchase of coverage for an individual who is eligible for other 
minimum essential coverage, with the exception of coverage in the 
individual market in accordance with section 26 CFR 1.36B-2(a)(2) and 
(c), or coverage in an eligible-employer sponsored plan that is 
unaffordable or does not meet the minimum value standard. Therefore, 
advance payments of the premium tax credit and cost-sharing reductions 
would not be provided to support the purchase of coverage for an 
individual enrolled in Medicaid, including while his or her Medicaid 
fair hearing is pending. We are confident that, regardless of the 
particular coordination arrangement for the Exchange and Medicaid in a 
State, there are sufficient requirements to prevent overlapping 
eligibility.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.525 of the 
proposed rule with the following modifications. In Sec.  155.525(b), we 
are adding, ``If the tax filer or appellant, as applicable, accepts 
eligibility pending an appeal,'' to indicate that pended eligibility 
must be afforded only if the tax filer or appellant accepts eligibility 
pending the appeal.
g. Dismissals (Sec.  155.530)
    In Sec.  155.530, we proposed the circumstances under which an 
appeals entity must dismiss an appeal, including when the appellant 
withdraws the appeal request in writing, fails to appear at a scheduled 
hearing, fails to submit a valid appeal request, or dies while the 
appeal is pending. We also proposed the content for dismissal notices 
provided to the appellant and to the Exchange, or Medicaid or CHIP 
agency, as applicable. Finally, we proposed the appeals entity may 
vacate a dismissal if an appellant submits a written request to vacate 
the dismissal within 30 days of the date of the dismissal notice and 
shows good cause.
    Comment: We received general support for the provisions of Sec.  
155.530. Several commenters noted the proposed provisions provide 
crucial protections against inappropriate dismissals. We also received 
comments noting that the Exchange appeals provisions provide more 
reasons to dismiss an appeal than the current Medicaid rules and the 
commenter recommended that the two rules be reconciled.
    Response: We are making only minor modifications to the proposed 
rule, in response to the comments below.
    Comment: We received comments requesting additional protections 
from dismissals for all appellants as well as appellants with special 
needs. For example, before allowing a dismissal as a result of a 
withdrawal or failure to appear, some commenters suggested that the 
appeals entity should confirm that necessary information was provided 
to the appellant in a language he or she understands. Several 
commenters also suggested that for an appellant who has indicated that 
English is not his or her preferred language, the appeals entity must 
document in the appellant's record what appropriate language services 
were provided before permitting the dismissal of such an appellant's 
appeal. Similarly, we received one comment that no appellant should be 
allowed to withdraw his or her appeal without proof that the appellant 
was provided information about his or her rights in the appeals 
process. Finally, a commenter requested that no dismissals for failure 
to appear be allowed unless an appellant is first provided notice and a 
hearing to address the dismissal.
    Response: As noted above, we received many comments requesting that 
provisions providing special accommodations for limited English 
proficient (LEP) and disabled individuals be included in various 
provisions in subpart F in part 155. We appreciate the difficulties 
individuals with special needs face during an administrative process. 
We are modifying paragraph (a)(2) by adding ``without good cause'' to 
the end of the provision requiring an appeal be dismissed if the 
appellant fails to appear at hearing in order to provide additional 
protection to appellants who have a compelling reason for missing a 
scheduled hearing. We also believe the requirements of Sec.  155.505(f) 
provide sufficient protection to such individuals throughout the 
appeals process. Section 155.505(f) requires the appeals process comply 
with the accessibility requirements of Sec.  155.205(c). Section 
155.205(c) requires information be provided in plain language and in a 
manner that is accessible and timely to individuals with disabilities, 
including accessible Web sites and the provision of auxiliary aids and 
services in accordance with the Americans with Disabilities Act and 
section 504 of the Rehabilitation Act, and individuals who are limited 
English proficient, including oral interpretations, written 
translations, an taglines in non-English languages. We are finalizing 
the provisions of this section with modification as noted above.
    Similarly, we are not modifying the dismissal process to require 
proof that the appellant was provided information about his or her 
rights in the appeals process or to require that appellants be 
permitted a hearing to address dismissals. The rule already provides 
for notice of appeal rights and procedures per Sec.  155.515, which 
requirement is sufficient for this purpose. In addition, appellants 
will be notified of the dismissal of their appeal, which notice must 
contain specific information about the reason for the dismissal as well 
as information about the process to vacate a dismissal. Therefore, we 
anticipate that the appellant will receive adequate information from 
the appeals entity and can also seek assistance from the appropriate 
customer service center or legal counsel. Given the required notice and 
opportunities for additional assistance, counsel, and vacating the 
dismissal, the protective measures we have provided for appellants 
whose appeals are dismissed are adequate.
    Comment: Commenters supplied several recommendations for 
modification for paragraph (b). One comment recommended that the notice 
of dismissal not have to be in writing to ease the burden on appeals 
entities while ensuring that notice is provided. Alternatively, we 
received several comments that the notice should be in writing and 
understandable by LEP and disabled individuals. Another commenter 
focused on the content of the notice and requested that we amend 
paragraph (b)(3) to state that the explanation of the dismissal should 
include examples of any pertinent materials related to the individual's 
case that would assist the applicant in proving good cause for vacating 
a dismissal.
    Response: We agree with the comment that notice of dismissal should 
be provided in writing because the dismissal of an appeal is a 
significant action of which an appellant should have record that he or 
she can easily reference, if needed. Appellants, particularly those who 
have special needs or may have limited understanding of administrative 
proceedings, will benefit from having a hard copy or electronic notice 
that shows the date of the dismissal, the reason, and an explanation of 
how he or she may request the dismissal be vacated. Therefore, we are 
finalizing the provision with a corresponding modification to require 
written notice. However, we are not requiring that dismissal notices 
provide examples of materials that might assist the appellant in 
requesting to vacate the dismissal.

[[Page 54104]]

Appeals entities may independently opt to provide additional 
information as a customer service function.
    Comment: We received several comments requesting that we clarify 
the meaning of ``timely notice'' as used in the proposed provisions of 
Sec.  155.530.
    Response: We are confident that the requirement that the dismissal 
notice be ``timely'' will help ensure that appellants' due process 
rights are not compromised. We note that ``timely notice'' is used 
throughout the Exchange provisions and in many public benefit programs; 
therefore, we anticipate that Exchanges are prepared to establish 
operating rules that implement appropriate timeliness requirements 
across the Exchange functions to ensure compliance. We are finalizing 
the provision as proposed in this regard, without providing specific 
timeframes for the dismissal notice, in order to leave appeals entities 
the flexibility to operationalize these requirements in the way that 
works best for them and the appellants they serve, but we note that we 
are modifying paragraph (c)(2), by adding ``if applicable'' to the 
provision to discontinue eligibility pending an appeal in the case of a 
dismissal.
    Comment: We received several comments regarding the timeline we 
proposed for an appellant to request that a dismissal be vacated. A few 
commenters suggested that the proposed timeframe is too short, 
particularly for individuals who seek such a remedy where they may be 
incapacitated or otherwise justified in receiving more time. One 
commenter recommended the provision be modified to allow 90 days to 
make the request to vacate. Alternatively, we received one comment that 
10 days is sufficient to request that a dismissal be vacated. The 
commenter noted that a shorter timeframe promotes efficient disposition 
of cases and will help to shorten the overall timeline for appeals.
    Response: We share the concern that the appeals process not be 
unnecessarily prolonged, which could create unintended coverage issues 
for appellants and be burdensome on administering agencies. To extend 
this window of time to the suggested 90 days would prolong the appeals 
process excessively; 30 days is sufficient for an appellant to provide 
the appeals entity a written request demonstrating good cause to vacate 
the dismissal of an appeal. Therefore, we are finalizing the timeframe 
in paragraph (d) as proposed.
    Comment: Commenters provided several suggestions regarding 
technical aspects of vacating dismissals. We received comment 
suggesting that vacating dismissals should be mandatory if the 
appellant makes a timely request and shows good cause. In addition, one 
commenter questioned the use of ``may'' in paragraph (d) and urged HHS 
to use ``shall,'' suggesting that, if good cause is shown, there is no 
reason to not vacate the dismissal. Finally, a commenter noted that the 
proposed rule did not include an opportunity to oppose the showing of 
good cause.
    Response: We agree that the permissive language used in the 
proposed provision should be replaced with mandatory language. If an 
appellant successfully demonstrates good cause for vacating a dismissal 
within the appropriate timeframe, the appeals entity must vacate the 
dismissal. However, we are not modifying the provision to provide an 
opportunity for an adverse party to oppose the showing of good cause by 
an appellant. A request to vacate a dismissal is not intended to be an 
adversarial process, but simply an opportunity to ensure that the 
appellant receives due process. If the appeals entity determines that 
the appellant has not shown good cause why the dismissal should be 
vacated, the appeals entity will not reinstate the appeal. We are 
finalizing paragraph (d) with a minor modification in this regard at 
paragraph (d)(1). We also note we are adding a new provision at Sec.  
155.530(d)(2) which states the appeals entity must ``provide timely 
written notice of the denial of a request to vacate a dismissal to the 
appellant.''
    Comment: We received one comment requesting clarification as to how 
a request to vacate a dismissal with a State Exchange appeals entity 
impacts the timeline for appealing an adverse decision from the State 
Exchange appeals entity to the HHS appeals entity.
    Response: Sections 155.505(c)(2) provides that an appellant may 
escalate an appeal to the HHS appeals entity upon exhaustion of the 
State Exchange appeals process. A refusal by the State Exchange appeals 
entity to reinstate a dismissed appeal constitutes exhaustion of the 
State Exchange appeals process; accordingly, an appellant may escalate 
his or her appeal to the HHS appeals entity upon such a refusal. We are 
modifying the final rule to specifically permit this by adding Sec.  
155.505(b)(4), as noted above.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.530 of the 
proposed rule with the following modifications. We are modifying 
paragraph (a)(2) to align more closely with Medicaid fair hearing rules 
by adding ``without good cause'' to the end of the provision requiring 
that appeals be dismissed if the appellant fails to appear at a 
scheduled hearing. In paragraph (b), we are inserting ``written'' into 
the provision to clarify that notice of dismissal to the appellant must 
be provided in writing. In paragraph (c)(2), we are amending the 
paragraph about by adding ``if applicable'' to the provision requiring 
instructions about discontinuing eligibility pending appeal in the case 
of a dismissal. In paragraph (d), we are replacing ``may'' with 
``must'' to indicate that the appeals entity is required to vacate a 
dismissal if the appellant makes a written request within 30 days of 
the date of the notice of dismissal showing good cause why the 
dismissal should be vacated, as determined by the appeals entity. We 
are also splitting Sec.  155.530(d) into two subsections, (d)(1) and 
(2). Section 155.530(d)(1) codifies the requirement just described, 
Sec.  155.530(d)(2) requires that the appeals entity must ``[p]rovide 
timely written notice of the denial of a request to vacate a dismissal 
to the appellant, if the request is denied.'' This new requirement 
facilitates providing appellants from State Exchange appeals entities 
notice that they may elevate the dismissal of their appeals to the HHS 
appeals entity for review as stated in Sec.  155.505(b)(4).
h. Informal Resolution and Hearing Requirements (Sec.  155.535)
    In Sec.  155.535, we proposed informal resolution and hearing 
requirements for adjudicating individual eligibility appeals. We 
proposed that informal resolution will be offered to appellants in the 
HHS appeals process, and may be offered to appellants in a State 
Exchange appeals process. We proposed standards for the provision of an 
informal resolution process in Sec.  155.535(a). In Sec.  155.535(b), 
we proposed that, when a hearing is scheduled, the appeals entity must 
send written notice to the appellant no later than 15 days prior to the 
date of the hearing. In paragraph (c), we proposed requirements for 
conducting hearings and in paragraph (d) we proposed the procedural 
rights afforded to an appellant in connection with the hearing. We 
proposed, in paragraph (e), that the appeals entity must consider the 
information used to determine the appellant's eligibility and any 
relevant evidence presented during the course of the appeal, including 
at the hearing. Finally, in paragraph (f), we proposed that the appeals 
entity must review appeals de novo.
    Comment: We received a variety of comments supporting the provision 
of an informal resolution process. We also

[[Page 54105]]

received many comments submitting questions or requesting modification 
to the proposed provision for the informal resolution process. For 
example, we received comment questioning whether State Exchanges will 
have control or input on how to conduct the informal resolution process 
within a State Exchange.
    Response: We note that States do have flexibility to implement an 
informal resolution process in the way that best fits each State's 
needs, to the extent the process meets the standards provided in this 
final rule and in any future guidance. States with questions about the 
implementation of an informal resolution process may contact CMS for 
technical guidance.
    Comment: We also received a comment requesting that we ensure that 
agencies are bound to follow a determination made through the informal 
resolution process, and particularly those that reverse a determination 
made by that agency. Another commenter thought the informal resolution 
decision should only be final and binding if the appellant agrees to 
it. We were also encouraged to reiterate in regulation that the 
appellant's right to a hearing is preserved regardless of participation 
in, or the outcome of, an informal resolution process.
    Response: We appreciate the comment that informal resolution 
decisions must be final and binding on the Exchange and agencies 
administering insurance affordability programs; this was our intent in 
the proposed rule. We included language to this effect in the proposed 
rule in Sec.  155.535(a)(4), which we are finalizing without 
modification. We also note that the proposed rule included in Sec.  
155.535(a)(2) the requirement that the appellant may advance to hearing 
if he or she is dissatisfied with the informal resolution decision. We 
believe the appellant is in the best position to determine whether 
further review after the informal resolution is appropriate.
    Comment: Several commenters also requested clarification that the 
informal resolution process does not cause the applicant to lose any 
rights to timely request a separate Medicaid fair hearing.
    Response: As discussed in Sec.  155.510 and in 42 CFR 
431.10(c)(ii), where an individual has both Medicaid and Exchange 
appeal rights, the individual will be presented the option to pursue an 
appeal of a denial of Medicaid eligibility directly with the Medicaid 
agency. (We note an exception that, where States delegate Medicaid 
appeals to the Exchange through an Intergovernmental Cooperation Act 
process, Federal law does not require that the appellant be provided an 
option to pursue his or her appeal of the denial of Medicaid 
eligibility directly with the State agency.) If the individual does opt 
to pursue two separate appeals (Medicaid eligibility before the 
relevant agency, and all other aspects of the appeal before the 
Exchange), we are maintaining flexibility in this final rule for States 
to determine how best to sequence the appeals.
    Comment: A commenter found paragraph (a)(4) confusing and 
questioned whether failure to appear is the same thing as an appeal 
that does not advance to hearing.
    Response: We note the provision in Sec.  155.530 that allows 
dismissal for failure to appear is intended to address situations in 
which the appellant fails to appear at a scheduled hearing without good 
cause. An appellant who accepts an informal resolution decision and 
does not wish to pursue the appeal through to the hearing stage is not 
required to request a hearing and will not be subject to this ground 
for dismissal.
    Comment: Commenters provided several thoughts about the timeframe 
of the informal resolution process. One commenter requested 
modification to the rule to indicate that informal resolution may not 
consume the entire 90-day period under proposed Sec.  155.545(b)(1) . 
Another commenter suggested that the 90-day appeal period does not 
provide sufficient time to conduct a comprehensive informal process 
while ensuring the appellant's right to a formal hearing. The commenter 
suggested that a minimum of 60 days to conduct an adequate informal 
resolution process and requested that we extend the overall timeframe 
for an appeal to conclude within 120 days.
    Response: The 90-day timeframe provided to resolve an appeal is 
intended to encompass both the time spent on both informal resolution 
and a hearing, as applicable. If a State Exchange appeals entity opts 
to provide an informal resolution process, pre-hearing, we provide the 
appeals entity flexibility to determine how to operationally apportion 
the 90-day timeframe between the two processes. We anticipate that the 
informal resolution process will provide an efficient means to resolve 
appeals but caution State Exchange appeals entities to preserve enough 
time to schedule and conduct a hearing, and issue an appeal decision, 
should the appeal involve a hearing. We decline to extend the timeframe 
to resolve an appeal and are finalizing the informal resolution 
provision as proposed.
    Comment: We received many comments concerning the notice of hearing 
required in paragraph (b). We received comments supportive of the 15-
day timeframe proposed for sending notice of the hearing to appellants. 
We also received comments supportive of the preamble discussion of 
acceptable hearing formats, including telephone and video 
teleconference, which an appeals entity may want to utilize and we were 
encouraged to include regulation text specifying that hearings may be 
offered in multiple formats.
    Response: We appreciate the support we received for this provision 
and the proposed timeframe of 15 days to send notice of the hearing to 
appellants. We also encourage appeals entities to consider alternative 
hearing formats as noted in the preamble, such as in-person, 
telephonic, and video teleconference, but decline to provide that level 
of operational specificity in the final rule.
    Comment: We also received many comments urging the treatment of an 
appeal request as a request for a hearing. Some commenters expressed 
concern that the proposed approach to schedule a hearing following an 
appellant's indication that he or she is dissatisfied with the informal 
resolution decision, if an informal process is offered, would delay the 
appellant's right to a hearing. Similarly, some commenters requested 
that the informal resolution process timeline run concurrently with the 
hearing timeline unless the appellant withdraws the hearing request; 
thus, the appeals entity would provide an informal resolution process 
while simultaneously preparing for a hearing, unless the appellant 
indicated that he or she did not wish to continue on to the hearing and 
ended the appeal by withdrawing the request for hearing. These 
commenters saw this as critical to ensure that the informal process 
does not delay the appellant's due process right to a hearing or cause 
the appellant to stop pursuing the appeal.
    Response: We understand that in the Medicaid fair hearing context, 
a request for an appeal is the functional equivalent of a request for 
hearing. In Exchanges that do not establish an informal resolution 
process, we intend appeal requests to be treated as requests for 
hearing. We note the value of informal resolution processes in terms of 
efficiency and cost for the appeals entity as well as the ease that 
such a process may provide to the appellant as compared to a formal 
hearing and, therefore, we encourage appeals entities and appellants to 
take advantage of the

[[Page 54106]]

informal resolution process prior to a hearing. We have also taken 
precautions in our requirements for the informal resolution process as 
described in paragraph (a) to ensure that participation in the informal 
resolution process does not in any way prevent an appellant from 
proceeding to a hearing. In response to these comments to the proposed 
rule, we will consider an appeal request a request for a hearing, but 
the option to offer the informal resolution process prior to the 
hearing is retained. Flexibility is provided to the appeals entities to 
determine whether the hearing is scheduled prior to or after informal 
resolution.
    Comment: We received several comments on paragraph (b) regarding 
the scheduling of a hearing. Several commenters expressed concern about 
the ability of a hearing to be rescheduled if the original date or time 
is prohibitive of participation. Several comments noted concern with 
the preamble discussion providing that an appeals entity is expected to 
work with the appellant to set a ``reasonable and mutually convenient 
date and time.'' Some commenters cautioned that the preamble language 
broadened the common standard of ``reasonable date'' to ``mutually 
convenient date,'' which could encourage fraudulent delay of the 
hearing by an appellant in order to continue to receive pended 
benefits.
    Response: The preamble discussion regarding the scheduling of 
hearings was meant to ensure that appellants are provided a reasonable 
opportunity to participate in the hearing. We share the concern 
regarding inappropriate dilatory tactics and understand that a 
``mutually convenient date and time'' may not reflect a clear standard. 
Therefore, we are clarifying in this final rule that if the appellant 
informs the appeals entity that the designated date and time for the 
hearing are prohibitive of participation, we expect that the appeals 
entity will work with the appellant to set a reasonable date and time 
for the hearing.
    Comment: Many commenters expressed general support for the 
provisions of paragraph (c), which we largely modeled after the 
Medicaid fair hearing provisions. With regard to these provisions, one 
commenter sought clarification as to whether appellants in States where 
an FFE is operating will receive in-person hearings. One commenter was 
concerned with the exact meaning of ``in the same matter'' as used in 
subparagraph (c)(4). The commenter thought the phrase could become a 
point of legal dispute in subsequent judicial reviews of hearing 
decisions and could lead to Exchange decisions being overturned in 
court on strictly procedural grounds just because an official was in 
some arguable way involved in a prior Exchange decision ``in the same 
matter.'' The commenter recommended that the rule simply state that all 
hearings must be conducted by one or more impartial officials who have 
not been directly involved in the eligibility determination. Similarly, 
another commenter did not see a reason for requiring a hearing to be 
conducted by an official who has not been involved in ``any prior 
Exchange appeal decisions in the same matter.'' The commenter noted 
that if a decision is remanded to the Exchange and an appeal is filed 
after the decision on remand, it would be more efficient to assign the 
same official to decide the new appeal. The commenter requested that 
the rule require only that an ``impartial official'' decide.
    Response: In response to the commenter's question about in-person 
hearings, we note that the appellants to the HHS appeals entity, 
regardless of whether they are appealing from an eligibility 
determination by an Federally-facilitated Exchange or an appeal 
decision by a State Exchange appeals entity, will most often receive a 
hearing via telephone or video teleconference. Within State Exchange 
appeals entities, we leave the hearing format to the discretion of 
appeals entity. With regard to the comments about the use of ``in the 
same matter'' in subparagraph (c)(4), we do not share the commenters' 
concerns. This provision mirrors the requirements for impartial review 
in the Medicaid fair hearing context and is meant to ensure that the 
appellant receives an independent and unbiased review of his or her 
eligibility determination. We are finalizing the provision as proposed.
    Comment: We received a few comments indicating general support for 
the provisions proposed in paragraphs (d) through (f), including the 
procedural rights of the appellant, information and evidence to be 
considered, and the standard of review for appeals.
    Response: We are finalizing these provisions as proposed, as we 
explain below.
    Comment: We received many comments on the provisions proposed in 
paragraph (d). We received a general comment advising HHS against 
extending a Medicaid fair hearing process to non-Medicaid appellants. 
In contrast, another commenter recommend including language in 
paragraph (d) stating that a State Exchange shall provide all 
procedural due process afforded Medicaid recipients in the State.
    Response: We determined that aligning our Exchange appeal 
requirements with Medicaid's fair hearing standards would create 
process efficiencies because States are already operating Medicaid fair 
hearing processes. In addition, we support the protections to the 
appellant that are provided through the Medicaid fair hearing process 
and believe that they are important when an appeal concerns eligibility 
to purchase a QHP through the Exchange and related insurance 
affordability programs, as well. We agree that flexible standards often 
result in innovative and efficient processes; however, in this context, 
where the due process rights involved are related to access to 
affordable, quality health care coverage, we consider it important to 
implement a standard framework for appeals processes with explicit 
appellant rights and protections to ensure that appellants receive full 
and fair review. Therefore, we are maintaining the alignment with 
Medicaid fair hearing rights and are finalizing the provisions as 
proposed.
    Comment: We received comment on the issues of burden of proof and, 
relatedly, the role of representatives of the entity that made the 
eligibility determination in an appeal. Some commenters noted that 
eligibility representatives are occasionally part of Medicaid fair 
hearings and did not want the Exchange rule to foreclose the 
possibility of cross examination in cases where an adverse witness is 
present. We also received a comment noting a State's intent to have 
government attorneys present to participate in Medicaid hearings and to 
process new information presented by the appellant at hearings. Another 
commenter wanted clarification that eligibility representatives could 
be present where State law either mandates the presence of an adverse 
party who has the burden of proof or requires a hearing officer to give 
significantly less weight to certain types of evidence if it is 
contradicted by live testimony of a witness who is available for cross-
examination. Finally, a commenter suggested that an applicant bear the 
burden of proof in any challenge to an initial eligibility 
determination, but that the Exchange bear the burden of proof in any 
challenge to a redetermination of eligibility or to a failure to 
provide timely notice.
    Response: Eligibility determinations are based on clear statutory 
and regulatory requirements and the appeals process will resolve 
appeals by applying these rules to the eligibility information before 
it, including the information used to make the eligibility 
determination

[[Page 54107]]

and any relevant information provided by the appellant during the 
appeals process. As a result, and as noted in the preamble to our 
proposed rule at 78 FR 4652, we anticipate that most hearings will be 
conducted in a non-adversarial manner and see no need for Exchange 
representation in an appeal of an Exchange determination.
    We understand that Medicaid and CHIP fair hearings sometimes do 
include representatives of the State agency and we anticipate that 
States may want to continue that practice. We also understand the 
benefits to the integrity of the process and to the appellant to have a 
representative of the entity that made the eligibility determination 
present and available to participate at a hearing, and our provisions 
do not foreclose the use of such representatives or the ability for the 
appellant or the hearing officer to examine them. However, we will not 
require that a representative of the eligibility entity must be present 
at eligibility hearings for the reasons stated above and we are 
finalizing the appeals rules without such a requirement. We similarly 
decline to provide guidance regarding burdens of proof; instead, we 
reiterate that the appeals entity will conduct a de novo review of the 
appeal and will proceed as though it were the first decision-maker in 
the matter, considering all the information in the eligibility and 
appeal records, as applicable, as well as any additional relevant 
evidence adduced before it during the appeal. Appellants should provide 
as much relevant information as possible to ensure that an accurate 
appeal decision can be rendered expeditiously.
    Comment: We received a few comments about the appellant's right to 
access the appeal record, as proposed in subparagraph (d)(1). One 
commenter recommended that the phrase ``appeal record'' be deleted as 
legally incorrect because the commonly understood term ``appeal 
record'' refers to documents that have been entered into evidence 
during an appeals process. The commenter suggested the key due process 
element is met by eliminating the term ``appeal record.'' We also 
received comment on the same provision recommending that the appellant 
be able to access to his or her electronic account in the same way 
Medicaid appellants have had access to a written case file.
    Response: We understand that ``appeal record'' may have a different 
meaning outside the Exchange context. However, we do not believe that 
the difference is so great that it will cause significant confusion for 
appellants, appellants' representatives, or appeals entities, and we 
are finalizing paragraph (d)(1), as proposed. ``Appeal record'' is 
defined in Sec.  155.500 as ``the appeal decision, all papers and 
requests filed in the proceeding, and, if a hearing was held, the 
transcript or recording of hearing testimony or an official report 
containing the substance of what happened at the hearing, and any 
exhibits introduced at the hearing.'' In the context of Sec.  
155.535(d)(1), this term means the appeal record as it exists as of the 
relevant date. For example, a transcript or recording of hearing 
testimony will not exist before the hearing is held, but the appellant 
still must be permitted to examine all papers and requests filed in the 
proceeding to date, including the eligibility record relied upon for 
the initial eligibility decision, at a reasonable time before the date 
of the hearing and during the hearing. Finally, we appreciate the 
comment that electronic access to files is ideal in terms of saving 
space, time, and cost, but we decline to add that level of specificity 
to this final rule; we leave such operational decisions to appeal 
entities.
    Comment: A few commenters sought modification of the provision for 
the appeal standard of review. Some commenters shared the opinion that 
the de novo standard should be used at the election of the appellant, 
assuming that the appellant best knows whether to have past relevant 
information used in the process. Another commenter suggested there may 
be instances where the appeals entity finds that deference to a prior 
decision would be appropriate and a de novo hearing would not be 
needed; therefore, the commenter recommended that the review should be 
de novo, unless the appeals entity determines that a de novo hearing is 
not needed.
    Response: We do not anticipate that most appellants will be in a 
position to determine the appropriate standard of review for their 
appeal. Many appellants will neither be familiar with the concept nor 
understand the impact of selecting one standard over another. We also 
disagree that the standard of review should be at the discretion of the 
appeals entity. We believe it is in the best interest of both 
appellants and appeals entities to use a consistent standard. The de 
novo standard of review protects the integrity of the process and 
ensures the fairest review for the appellant. We are finalizing the 
provision as proposed.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.535 of the 
proposed rule with the following modification. In Sec.  155.535(e) and 
(f), we are changing ``appeal'' to ``appeals process'' for additional 
clarity.
i. Expedited Appeals (Sec.  155.540)
    In Sec.  155.540, we proposed the standards for expedited appeals. 
Specifically, we proposed that the appeals entity must establish and 
maintain an expedited appeals process for appellants to request where 
there is an immediate need for health services because a standard 
appeal could seriously jeopardize the appellant's life or health or 
ability to attain, maintain, or regain maximum function. We also 
proposed that if an appeal entity denies a request for an expedited 
appeal, it must handle the appeal under the standard process and notify 
the appellant of the denial.
    Comment: We received general support for the inclusion of an 
expedited appeals process in the proposed rule from many commenters. 
Supporters viewed the provision as preventing gaps in coverage or 
access to vital care while the appeal is being adjudicated. However, we 
also received comments that the expedited appeal provisions should be 
removed or, alternatively, offered as a State option. Many of these 
commenters shared a variety of concerns. For example, some commenters 
expressed concern that the availability of an expedited process may 
create an unchecked incentive for individuals to claim medical need in 
order to expedite an appeal, thereby increasing the volume and burden 
associated with the expedited process. We received comment that the 
definition of those who qualify for expedited hearings is too broad and 
should be removed from the rule. Another commenter noted that the 
proposed process does not parallel Medicaid's provisions because, 
unlike Medicaid, the Exchange facilitates the purchase of coverage 
rather than providing it directly. Finally, we received comment that 
the expedited appeals process would require the appeals entity to 
evaluate questions of fact (whether there is actually an immediate need 
for health services, as contemplated in the proposed rule, which the 
commenter viewed as having no relation to the appellant's eligibility; 
thus, the expedited process would unnecessarily deplete resources and 
distract from the main purpose of the appeals entity.
    Response: We consider access to and continuity of coverage to be an 
important factor in health care, particularly for those individuals who 
require immediate care. Many

[[Page 54108]]

individuals will not be able to pay for urgently needed health services 
without coverage, and will not be able to access affordable coverage 
except through an Exchange eligibility determination; therefore, we see 
a clear link between eligibility appeals and the need to offer an 
expedited timeframe for those individuals facing an immediate need for 
health care services. However, maintaining an appeals process to 
address these situations requires significant investment by the appeals 
entity first to determine which cases fit the standards for an 
expedited appeal, and then to swiftly adjudicate the appeal. As a 
result, we are finalizing the expedited appeals provisions with 
modification, requiring Exchange appeals entities to provide an 
expedited appeal process, but removing the two-day timeframe to issue 
notices of the denial of a request for an expedited appeal and 
requiring instead that the notice be issued ``within the timeframe 
established by the Secretary.'' We will publish guidance regarding the 
establishment of an expedited appeal timeframe that recognizes the 
appellant's immediate need for health services while acknowledging 
administrative constraints.
    Comment: Several commenters provided many suggestions as to how the 
expedited appeals process could be modified. For example, one commenter 
proposed that the informal resolution process could be used as a venue 
to quickly address an expedited appeal request and help appellants 
understand why an eligibility decision was made.
    Response: Although we see the advantages to quick resolution 
through the informal resolution process, the expedited appeals process 
should provide the same level of due process as the standard appeals 
process. Therefore, we clarify that the expedited process must make the 
right to a hearing available to the appellant.
    Comment: Another commenter recommended that the rule for expedited 
appeals state that the appellant bears the burden to demonstrate that 
he or she meets the definition for an expedited appeal and must provide 
medical documentation to that effect. Similarly, one commenter 
suggested that any person seeking an expedited appeal should be 
required to submit specific information, including medical 
documentation, showing how he or she satisfies the standard, subject to 
a page limit or other limitation on the amount of documentation 
submitted to avoid inundating the appeals entity with material as it 
makes its decision whether to expedite the appeal.
    Response: We agree that an appellant requesting an expedited appeal 
must provide sufficient information to the appeals entity to enable to 
enable the appeals entity to determine whether the appellant meets the 
standard for an expedited appeal. We are not providing specific 
regulatory language specifying the information or types of information 
an appellant must provide to substantiate an expedited appeal request. 
We expect appeals entities to establish appropriate measures to 
determine which appellants seeking an expedited appeal meet the 
standard for an expedited appeal.
    Comment: We received comments seeking examples of situations that 
qualify for expedited appeals.
    Response: We expect appeals entities to make decisions about 
requests for expedited appeals on a case-by-case basis, based on the 
totality of all the relevant information provided to the appeals entity 
about the need for immediate health services. Because each case must be 
judged on an individual basis, we decline to provide specific examples 
of situations that would qualify for an expedited appeal.
    Comment: We received many comments requesting that access to the 
expedited appeals process be limited. One commenter recommended that 
expedited appeals be limited to initial denials of eligibility or 
redeterminations resulting in a loss of eligibility to more adequately 
address the issue of continuity of coverage. We also received a few 
comments that expedited appeals should not be available for individuals 
who receive determinations for advance payments of the premium tax 
credit or cost-sharing reductions. Finally, a request was made to 
delineate that individuals with serious and complex medical conditions, 
including HIV and viral hepatitis, automatically qualify for an 
expedited process because delaying or disrupting treatment or access to 
affordable medications can result in serious medical consequences for 
these individuals.
    Response: We understand that expedited appeals will require an 
investment of resources by the appeals entity and, consequently, 
understand the desire to limit the volume of expedited appeal requests. 
However, expedited appeals can provide an important mode of access to 
coverage and care that some individuals will be heavily reliant upon 
for immediate or continuing care. We encourage appeals entities to 
educate consumers on the purpose of an expedited appeal so that 
individuals can assess which process is appropriate for their 
situation. An expedited appeal is meant to assist individuals whose 
health might be harmed by the length of time required for the standard 
appeal process, and we do not anticipate that such harm will be limited 
to individuals who have received specific eligibility or ineligibility 
determinations. We note that we are finalizing the provision with minor 
modification by removing ``seriously'' from Sec.  155.540(a) because we 
believe ``jeopardize the appellant's life'' sufficiently states the 
standard for an expedited appeal.
    Comment: We received many comments regarding the timeframe for 
denying requests for expedited appeals. Some commenters supported the 
proposed two-day timeframe. Other commenters expressed concern over the 
proposed timeframe and how its brevity might limit effective review of 
the expedited appeal request. Some commenters recommended alternative 
timeframes ranging from three to seven days. Finally, we received a 
comment requesting that we specify the timeframe for denying expedited 
appeal requests in paragraph (b)(2) in terms of business days rather 
than calendar days.
    Response: As noted above, we are modifying the final rule from the 
proposed rule by eliminating the two-day requirement and requiring 
instead that the notice of denial of an expedited appeal request be 
issued ``within the timeframe established by the Secretary.''
    Comment: With regard to the content of the notice denying a request 
for an expedited appeal, we received comments requesting that we 
require such notice to state the reason for the denial, the fact that 
the appeal will be heard on the standard timeframe, and any options the 
appellant may have if he or she disagrees with the decision.
    Response: Notices provide valuable information to individuals about 
the actions being taken, the reason for actions taken, the individual's 
rights and available protections, as well as next steps. We agree that 
individuals who are denied an expedited appeal would benefit from a 
detailed denial notice. Paragraph (b) proposed that notice of a denial 
could be provided orally or electronically as long as the appeals 
entity followed oral notification with a written notice within two days 
of the denial. We are modifying paragraph (b) to require specific 
content in the written notice for the denial of an expedited appeal 
request, including the reason for the denial, an explanation that the 
appeal request will be transferred to the standard process, and an 
explanation of the appellant's rights under the standard process. We 
are not modifying this provision to require the appeals entity to 
include in the notice

[[Page 54109]]

an explanation of the options available to the appellant if he or she 
disagrees with the decision regarding the request for an expedited 
appeal, because there is no administrative appeal of the denial of an 
expedited appeal request. Although nothing in this final rule limits 
any judicial review that may be available under the law, we note that 
the appellant will likely receive the quickest relief through the 
standard appeal process.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.540 of the 
proposed rule with the following modifications. In paragraph (a), we 
are removing ``seriously'' from the standard for an expedited appeal 
because meeting the requirement that a standard appeal could 
``jeopardize the appellant's life'' is sufficient. In subparagraph 
(b)(2), we restructured the provision and removed the proposed 
requirement that the written follow-up notice after oral notification 
of the denial of an expedited appeal request be provided within ``2 
days of the denial.'' We are replacing this proposed timeframe with the 
requirement that the notice be issued ``within the timeframe 
established by the Secretary.'' We are also replacing, ``if notified 
orally'' with ``if notification is oral,'' for clarity. The provision 
now states, ``Inform the appellant, promptly and without undue delay, 
through electronic or oral notification, if possible, of the denial 
and, if notification is oral, follow up with the appellant by written 
notice, within the timeframe established by the Secretary. Written 
notice of the denial must include--.'' We are adding a new subparagraph 
(b)(2)(i) to require that the written notice of the denial include the 
reason for the denial of the expedited appeal request. Similarly, new 
subparagraph (b)(2)(ii) requires that the written denial notice contain 
an explanation that the appeal request will be transferred to the 
standard appeals process and new subparagraph (b)(2)(iii) requires that 
the denial notice include an explanation of the appellant's rights 
under the standard process.
j. Appeal Decisions (Sec.  155.545)
    In Sec.  155.545, we proposed requirements for the basis, content, 
notice, and implementation of appeal decisions. In Sec.  155.545(a), we 
proposed standards for appeal decisions, including the scope of 
information a decision may be based upon and the decision content. In 
Sec.  155.545(b), we proposed timeframes for issuing notice of the 
appeal decision and instructions for sending the appeal decision to the 
appellant and to the Exchange or Medicaid or CHIP agency, as 
applicable. Finally, in Sec.  155.545(c), we proposed standards for 
implementing appeal decisions, including the effective date of 
implementation, as well as requirements for redetermining eligibility 
for other household members whose eligibility may be affected by the 
appeal decision.
    Comment: We received support for the appeals provisions in Sec.  
155.545(a). A few commenters recommended the contents of the appeal 
decision also include language explaining the time limits to escalate 
an appeal from a State Exchange appeals entity to HHS. Another 
commenter encouraged us to require State Exchange appeals entities to 
include information that the decision is final, unless the individual 
pursues further review by HHS.
    Response: We agree with commenters' suggestions, and are finalizing 
the provisions of Sec.  155.545(a) with minor modification in response 
to the comments above. We are moving the proposed requirement to 
provide an explanation of the right to pursue the appeal at HHS, 
including the applicable timeframe, to new subparagraph, Sec.  
155.545(a)(6)(i). In addition, we are adding new subparagraph Sec.  
155.545(a)(6)(ii) to require appeal decisions from State Exchange 
appeals entities to indicate that the decision is final unless the 
appellant escalates the appeal to the HHS appeals entity. We anticipate 
that this additional information will assist an appellant in a State 
Exchange appeals process to better understand the impact of the 
escalation decision and his or her options for further to appeal to 
HHS. Finally, we also note we are modifying paragraph (a)(1) by adding 
reference to subpart G and ``and if the Medicaid or CHIP agencies 
delegate authority to conduct the Medicaid fair hearing or CHIP review 
to the appeals entity in accordance with 42 CFR 431.10(c)(1)(ii) or 
457.1120, the eligibility requirements under 42 CFR parts 435 and 457, 
as applicable'' to address appeal decisions involving appeals delegated 
by State Medicaid or CHIP agencies.
    Comment: We received many comments on the proposed timeframe for 
adjudicating eligibility appeals in Sec.  155.545(b)(1). Some 
commenters suggested a longer timeframe, while others recommended a 
shorter timeframe; many commenters indicated support for State 
flexibility in this area. Some commenters indicated that the 90-day 
timeframe to resolve an appeal is not sufficient to conduct a 
comprehensive informal process while ensuring the appellant's right to 
a formal hearing. We received the recommendation that appeals entities 
be provided 120 days to issue the final appeal decision. Alternatively, 
one commenter urged us to limit the timeframe for issuing an appeals 
decision in order to mitigate the adverse effects of a prolonged 
appeals process and lessen the period of uncertainty for an appellant. 
Similarly, one commenter recommended the timeframe be shortened to less 
than 90 days as a means to limit the amount of retroactive adjustments 
in eligibility, as discussed below. Finally, other commenters supported 
the proposed 90-day timeframe, and some encouraged us to require 
decisions to be made as expeditiously as possible within the required 
timeframe.
    Response: Because we must balance the pressing interests of the 
appellant and the administrative concerns of the appeals entity, we are 
finalizing the provision as proposed with the 90-day timeframe. This 
aligns with the current Medicaid fair hearing timeframe for issuing 
appeal decisions and provides an adequate timeframe in which the 
appeals entity can complete its review while not delaying resolution 
beyond acceptable limits. We understand that appellants who elevate 
State Exchange appeal decisions to HHS may face longer timeframes for 
resolution due to the second level of appeal, but we reiterate that 
section 1411(f)(1) of the Affordable Care Act requires this Federal 
review to be available for individual eligibility appeal decisions by 
State Exchange appeals entities, for appellants who choose to avail 
themselves of it. In all cases, we encourage appeals entities to 
resolve appeals as expeditiously as possible.
    Comment: Commenters did not support the inclusion of the phrase 
``as administratively feasible'' in Sec.  155.545(b)(1). Commenters saw 
the phrase as creating a loophole that allows standards to be ignored. 
In addition, commenters saw this as creating problems in getting a 
timely Medicaid fair hearing decision, for example when the appellant 
opts to pursue a Medicaid appeal before the State Medicaid agency 
instead of the Exchange appeals entity. Commenters urged HHS to 
maintain the standard for completing the appeal within 90 days of the 
date of the request. Some commenters also encouraged us to add language 
to establish an expectation for timely decision-making to ensure an 
efficient process.
    Response: We share the commenters' concerns for timely adjudication 
of appeals. As noted in our discussion of other sections in this final 
rule, we also understand the pressures Exchanges

[[Page 54110]]

face to build appeals systems, connect with the Federal process and 
other agencies administering insurance affordability programs, 
establish appeals protocols, and ultimately process appeals, the volume 
of which is not yet known and many of which may be complex. Because 
administrative realities must be taken into account, we are finalizing 
the provisions as proposed in this regard, allowing some reasonable 
administrative flexibility as concerns the 90-day timeframe for issuing 
an appeal decision. However, we note that, though we are maintaining 
this administrative flexibility, we fully expect appeals entities to 
adjudicate appeals within the 90-day timeframe in every case in which 
it is reasonably administratively feasible to do so.
    Comment: One commenter noted that if a State does not delegate 
Medicaid or CHIP appeals authority to the Exchange, States require 
additional guidance to define the State's responsibility for these 
types of appeals when the Exchange appeals entity cannot issue an 
appeal decision within 90 days.
    Response: We encourage those States that do not delegate Medicaid 
or CHIP appeals authority to the Exchange to anticipate situations 
where the non-delegation may jeopardize the efficiency of 
administrative processes and work to ensure adequate communication and 
timely processes to prevent unnecessary delay for the appellant and the 
agencies and appeals entities concerned.
    Comment: The proposed timeframe for issuing an expedited appeal 
decision received many comments. We received support for the proposed 
timeframe of three working days as well as many recommendations to 
lengthen the timeframe. Some commenters noted that three working days 
is too short to allow time for the appellant and the agency to prepare 
properly for the appeal, including gathering the relevant information 
and providing a hearing. One commenter recommended the expedited 
timeframe for a decision be no less than 45 days. Finally, we received 
a request to clarify whether the three day timeframe begins from the 
date of the request for appeal or from the date an expedited hearing is 
held.
    Response: We received many comments from States that it would not 
be administratively possible to provide an appellant a hearing and 
generate an appeal decision within the proposed three-day timeframe for 
expedited appeals. Commenters did not address an alternative, 
reasonable timeframe. In response to the comments received, we are 
modifying the proposed rule by eliminating the three-day requirement, 
and instead, in this final rule, we are requiring that the timeframe 
for issuing expedited appeal decisions be ``as expeditiously as 
reasonably possible, consistent with the timeframe established by the 
Secretary.'' We will publish guidance regarding the establishment of an 
expedited appeal timeframe that recognizes the appellant's immediate 
need for health services while acknowledging administrative 
constraints.
    Comment: One commenter requested more information about what would 
happen if an appeal crosses over benefit years.
    Response: Although not addressed in the final rule, it is our 
intention that an appeal that crosses over benefit years will be 
treated like any other appeal.
    Comment: Several commenters recommended that tax filers who rely in 
good faith on an eligibility determination by the Exchange or appeals 
entity should be granted a safe harbor from having to pay back some or 
all of any advance payments of the premium tax credit they may receive 
for a coverage year during tax reconciliation, to the extent that the 
IRS may take a different view regarding the tax filer's eligibility for 
premium tax credits.
    Response: The Exchange's determination takes a prospective look at 
an applicant's anticipated household income for a coverage year to 
determine eligibility for advance payments of the premium tax credit. 
The eligibility appeals process uses the same standards to examine 
eligibility for advance payments of the premium tax credit, taking into 
account any new, relevant evidence an appellant may provide. The appeal 
decision will provide an eligibility determination that is accurate 
based on the eligibility information to which the appeals entity has 
access; however, the IRS reconciliation process (which is regulated and 
administered by the IRS and is outside the scope of these final rules) 
looks retrospectively at a tax filer's actual income for the tax year 
to accurately determine the premium tax credit for which the tax filer 
is eligible. The IRS is the sole authority on the tax reconciliation 
process that occurs after the close of a tax year.
    Comment: A few commenters found it difficult to determine the 
decision effective date based on the proposed appeal decision 
implementation provisions in Sec.  155.545(c)(1). Some commenters found 
the reference to Sec.  155.330(f) confusing. We received the 
recommendation that Sec.  155.545(c)(1) should require that the 
effective date of the appeals decision be the date that the incorrect 
eligibility determination was made or other adverse action was taken, 
so as to fully remedy the error.
    Response: Section 155.330(f) requires Exchanges to implement 
changes resulting from an appeal decision, ``on the date specified in 
the appeal decision.'' In addition, we have slightly modified proposed 
Sec.  155.545(c)(1) in this final rule to provide that eligibility 
resulting from an appeal be implemented prospectively, beginning on the 
first day of the month following the date of the notice of the appeal 
decision, or retroactively, to the date the incorrect eligibility 
determination was made, or at the option of the appellant. If an 
eligibility determination was made in error, the notice of the appeal 
decision will provide the appellant with the opportunity to choose a 
retroactive effective date for the correct the eligibility 
determination, in order to make the appellant whole. If an eligibility 
determination was correct when made, but new, relevant information 
provided during the course of the appeal establishes that a different 
eligibility determination is correct at the time of the appeal, the 
appeal decision will provide a prospective effective date.
    Comment: We received many comments reflecting a spectrum of 
opinions for the proposed requirement to implement certain appeal 
decisions retroactively. We note that many of these comments also apply 
to the pended eligibility provisions proposed in Sec.  155.525, which 
may require retroactive enrollment, such as where there is a delay 
between the appellant's appeal request and the tax filer's notification 
to the appeals entity that he or she wishes to accept pended 
eligibility, if applicable.
    Many commenters supporting retroactive effect for individual 
eligibility appeal decisions noted that retroactivity can be critical 
to appellants receiving due process because retroactive effect can 
serve as both an important consumer protection and a corrective 
mechanism. In addition, these commenters supported retroactive effect 
for individual eligibility appeal decisions because it prevents 
appellants from being harmed by the time required to complete the 
appeals process.
    Several commenters responded to preamble discussion regarding ways 
to limit the applicability of retroactivity. A handful of commenters 
recommended that appellants be allowed to ``opt out'' of retroactive 
effect because some appellants might not wish to pay back premiums for 
coverage, such as those who may not have incurred medical expenses for 
which they might want to be reimbursed. Comments considering

[[Page 54111]]

this option questioned the timeframe in which an appellant who opted 
for retroactive eligibility would be expected to pay back premiums to 
the issuer. In addition, one commenter recommended that we waive 
payment of premiums for the appellants who are retroactively enrolled 
in a QHP through the Exchange because the need for retroactive 
enrollment is not the fault of the appellant. We also received support 
for the preamble proposal to limit retroactive effect for appeal 
decisions to those already enrolled in coverage. Another commenter 
recommended limiting retroactive effect to only those appellants who do 
not qualify for eligibility pending appeal. A few commenters noted 
that, if an appellant opts for retroactive effect for the appeal 
decision, corresponding benefits should only be made available after 
the appellant has paid the premium covering the entire period of 
retroactive effect. We received another comment that retroactive effect 
for appeal decisions should be optional for Exchanges to implement or, 
in the alternative, Exchanges should be afforded flexibility in 
implementing retroactivity.
    Comments opposing the proposed provision on retroactive effect for 
appeal decisions provision largely focused on the operational 
difficulties associated with retroactive enrollment in a QHP, 
reimbursements for past health care expenditures, and payment of back 
premiums, but did not question that retroactive effect for appeal 
decisions may be, in some cases, a fundamental due process right. 
First, some commenters felt that retroactive effect will result in 
unnecessary confusion and complexity for consumers, issuers, and 
providers, and would add administrative burden and costs to the system. 
Several commenters specifically mentioned complexity where the 
appellant was not enrolled in coverage before the appeal decision, and 
the appeal decision provides the appellant the opportunity to elect 
retroactive effect. Second, several commenters noted retroactive effect 
for appeal decisions could result in some adverse selection because 
many individuals eligible to retroactively enroll in coverage would 
choose to do so only when they have already incurred claims for medical 
services. Third, some commenters expressed concern for the timeframe 
that retroactive effect for an appeal decision could encompass, citing 
the 90-day period to request an appeal, the 90-day period to issue an 
appeal decision, and the additional 30 days and 90 days possible in the 
case of an escalation appeal to HHS, if the appellant elevates the 
appeal from a State Exchange appeals entity. These commenters pointed 
out that issuers could be faced with collecting back premium and 
reimbursing for past services going back several months. Some 
commenters recommended shortening the timeframe for which retroactive 
effect could be given to an appeal decision to only 90 days, rather 
than back to the date of the incorrect eligibility determination. 
Similarly, we received comments that some State laws may limit the 
extent to which these retroactive collections and reimbursements can be 
made, and these State law timeframes may be shorter than the total 
timeframe possible in the case of an individual eligibility appeal. 
Finally, some commenters expressed concern about complexity involved in 
payments to providers that may be affected by retroactive enrollment in 
a QHP through the Exchange, and the intersection of this policy with 
other enrollment policies in the Exchange rules. These comments are 
further detailed below.
    Response: Although we recognize the operational complexities 
involved with giving retroactive effect to an individual eligibility 
appeal decision, we are finalizing proposed Sec.  155.545(c) with only 
minor modification, and we are retaining the concept of retroactive 
implementation. We believe that appellants must be given the option to 
choose to give effect to an appeal decision that alters the appellant's 
original eligibility determination, retroactive to the date that the 
incorrect eligibility determination was made. The purpose of an appeal 
is to ensure the appellant receives the appropriate eligibility 
determination. Thus, in the Medicaid context, State agencies are 
directed to make corrective payments retroactive to the date an 
incorrect action was taken under 42 CFR 431.246. Retroactive appeal 
decisions can also protect appellants from unfairly having to pay the 
individual responsibility penalty under Sec.  5000A of the Internal 
Revenue Code, which might otherwise apply if the appellant does not 
maintain coverage throughout the year.
    As noted above, we presented in preamble to the proposed rule at 78 
FR 4653 the option that an appellant could choose not to retroactively 
enroll in coverage to avoid paying past premiums. In response to the 
comments discussed above, we are now modifying the proposed provision 
to allow an appellant whose appeal decision reflects that the 
eligibility determination being appealed was incorrect to choose to 
have effect given to the appeal decision, retroactive to the date of 
the incorrect eligibility determination. This modification is 
implemented in new Sec.  155.545(c)(1)(ii). Appellants who opt for 
retroactive effect will be required to pay applicable back-premiums for 
retroactive coverage to be effective. The technical aspects of this 
approach will be addressed in future guidance. Appellants who do not 
opt for retroactive effect will be offered a hardship exemption 
pursuant to Sec.  155.605(g)(1) and as described in the Center for 
Consumer Information & Insurance Oversight, Guidance on Hardship 
Exemption Criteria and Special Enrollment Periods (June 26, 2013), so 
that these appellants will not be liable to pay the individual 
responsibility penalty under Sec.  5000A of the Internal Revenue Code 
for a failure to maintain minimum essential coverage that was 
associated with an erroneous eligibility determination. Finally, we 
note a modification to Sec.  155.545(c) in which we removed ``or the 
Medicaid and CHIP agency, as applicable'' and ``in accordance with the 
applicable Medicaid or CHIP standards in 42 CFR parts 435 and 457, as 
applicable'' in subparagraph (c)(1)(iii) to clarify that the provision 
relates to only the Exchange and State Medicaid and CHIP agencies will 
follow their respective rules for implementation following receipt of 
the appeal decision notice.
    Comment: We received many comments regarding how issuers would 
manage retroactive enrollments and related payments or reimbursements. 
Some commenters expressed concern that retroactive eligibility would 
place liability for inaccurate eligibility determinations made by the 
Exchange on the issuer. Some commenters focused on the impact 
retroactive eligibility could have on financial management, including 
cost-sharing reductions, reinsurance, and risk adjustment. Some 
commenters also noted that retroactive changes may result in inaccurate 
calculations for the Medical Loss Ratio (MLR) and risk corridor 
programs, resulting in inaccurate payments to enrollees, and noted that 
appellants may have a significant volume of retroactive claims to 
address, given the timeframe potentially involved in an individual 
eligibility appeal.
    Response: We are finalizing the rule without limiting the ability 
of an appellant who meets the standards for retroactive eligibility to 
choose to give his or her appeal decision full retroactive effect. 
However, we will consider providing further operational guidance on the 
issues noted above by commenters.

[[Page 54112]]

    Comment: Regarding implementation of expedited appeal decisions, a 
commenter recommended that the final rule address the timeline for QHPs 
to effectuate coverage resulting from an expedited appeal decision to 
minimize QHP liability to pay for services rendered during the appeals 
process but for which an expedited appeal process may determine the 
individual was not eligible.
    Response: We neither proposed nor provide for an expedited 
enrollment process following an expedited appeal decision in the final 
rule and direct commenters to the standards for enrollment periods 
established in in part 155 subpart E.
    Comment: Several commenters supported the proposed requirement in 
Sec.  155.545(c)(2) that an appellant's household members' eligibility 
be redetermined if the appeal decision has implications for the 
eligibility of other members of the household. These commenters noted 
that this policy may protect the tax filer from having to pay back 
advance payments of the premium tax credit made on behalf of other 
household members at reconciliation.
    Response: We are finalizing the provision in Sec.  155.545(c)(2) as 
proposed. This policy will help ensure that the Exchange provides 
accurate eligibility determinations for all household members, which is 
a protective measure for the tax payer as concerns the reconciliation 
process.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.545 of the 
proposed rule with the following modifications. In paragraph (a)(1), we 
are adding reference to subpart G to ensure that appeal decisions 
concerning exemptions must be based on the eligibility requirements set 
forth in that subpart. We are also modifying this Sec.  155.545(a) to 
provide greater clarity regarding appeal decisions involving appeals 
delegated by State Medicaid or CHIP agencies. Paragraph (a)(1) now 
provides that appeal decisions must ``[b]e based exclusively on the 
information and evidence specified in Sec.  155.535(e) and the 
eligibility requirements under subpart D or G of this part, as 
applicable, and if the Medicaid or CHIP agencies delegate authority to 
conduct the Medicaid fair hearing or CHIP review to the appeals entity 
in accordance with 42 CFR 431.10(c)(1)(ii) or 457.1120, the eligibility 
requirements under 42 CFR parts 435 and 457, as applicable.'' We are 
moving the requirement originally proposed in Sec.  155.545(a)(6) to 
new subparagraph(a)(6)(i) and inserting language to require that the 
notice of appeal decision provided by a State Exchange appeals entity 
must include an explanation of the appellant's right to pursue the 
appeal before the HHS appeals entity, ``including the applicable 
timeframe'' to submit such an appeal request. We are also adding new 
subparagraph Sec.  155.545(a)(6)(ii) to require that a notice of appeal 
decision provided by a State Exchange appeals entity ``[i]ndicate that 
the decision of the State Exchange appeals entity is final, unless the 
appellant pursues the appeal before the HHS appeals entity.''
    In paragraph (b)(1), we are making a minor change to add ``of'' 
between ``date'' and ``an.'' In Sec.  155.545(b)(2), we are removing 
the timeframe for providing an expedited appeal decision; the provision 
now states that expedited appeal decisions must be issued ``as 
expeditiously as reasonably possible, consistent with the timeframe 
established by the Secretary.''
    We are removing from Sec.  155.545(c) ``or the Medicaid and CHIP 
agency, as applicable'' along with ``in accordance with the applicable 
Medicaid or CHIP standards in 42 CFR parts 435 and 457, as applicable'' 
in subparagraph (c)(1)(iii) to clarify that the provision relates to 
only the Exchange. We are modifying proposed Sec.  155.545(c) regarding 
the implementation date for appeals decisions. In Sec.  155.545(c)(1), 
we are including language so that the provision now reads, ``Implement 
the appeal decision effective[,]'' followed by new subparagraph 
(c)(1)(i), which states, ``[p]rospectively, on the first day of the 
month following the date of the notice of appeal decision, or 
consistent with Sec.  155.330(f)(2) or (f)(3), if applicable[.]'' New 
subparagraph (c)(1)(ii) further provides that an appeal decision may be 
implemented ``[r]etroactively to the date the incorrect eligibility 
determination was made, at the option of the appellant.''
k. Appeal Record (Sec.  155.550)
    In Sec.  155.550, we proposed requirements for accessing the appeal 
record. The proposed requirements included both appellant and public 
access to the appeals records. We proposed that all access would be 
subject to applicable laws regarding privacy, confidentiality, 
disclosure, and personally identifiable information.
    Comment: In response to Sec.  155.550, we received several comments 
offering general support for the proposed provisions. Some commenters 
stated that access to the appeals record promotes transparency and 
accountability in the eligibility appeals process.
    Response: We are finalizing Sec.  155.550 with minor modification 
as outlined below. We consider access to the appeal record to be an 
important tool for appellants in order to understand the eligibility 
and appeals process, and their appeal decision. In addition, we agree 
that public access, subject to laws concerning privacy, 
confidentiality, disclosure, and personally identifiable information, 
promotes transparency and accountability, program integrity, and 
quality.
    Comment: We received one comment requesting that we confirm that 
providing a digital audio recording of the hearing is sufficient to 
satisfy the requirements of Sec.  155.550(a) to make the appeal record 
available to the appellant. The commenter expressed concern about 
increased costs if written transcripts must be provided.
    Response: The appeals record is defined in Sec.  155.500. The 
definition specifies that the appeals record includes ``the appeal 
decision, all papers and requests filed in the proceeding, and, if a 
hearing was held, the transcript or recording of hearing testimony or 
an official report containing the substance of what happened at the 
hearing, and any exhibits introduced at the hearing.'' Therefore, an 
audio recording of the hearing is sufficient to meet the requirement 
that a transcript or recording of hearing testimony be included in the 
appeal record, when a hearing is held. We note that the record must not 
be limited to an audio recording or transcript of the hearing and must 
fully comport with the regulatory definition of ``appeal record.'' 
Appeals entities that wish to include only an audio recording of any 
hearing in the appeal record should take into account the needs of 
appellants who may encounter difficulties accessing or re-playing audio 
recordings, and make appropriate efforts to ensure that appellants who 
encounter these barriers are able to meaningfully access their appeal 
record, consistent with this final rule.
    Comment: We received a few comments requesting modifications to 
155.550(b) of the proposed rule. Several commenters recommended that 
the Medicaid fair hearing rules regarding public access to the appeals 
record be followed to align the programs, including limiting public 
access to only the redacted appeal decision. A few commenters cited 
consequences of allowing public access, including discouraging 
individuals from appealing for fear that information, even if redacted, 
could be access by anyone and the increased labor and costs associated

[[Page 54113]]

with redacting appeal records. Similarly, we received several comments 
requesting that we confirm that an appeals entity may require the 
public to reimburse the appeals entity for costs associated with 
compliance with Sec.  155.550(b).
    Response: In response to comments requesting closer alignment with 
Medicaid rules and concerns about increased costs and burden on appeals 
entities, we are modifying Sec.  155.550(b) to allow public access to 
only the appeal decision, subject to all applicable laws concerning 
privacy, confidentiality, disclosure, and personally identifiable 
information. We believe this approach will balance the interests of the 
appellant, appeals entity, and the public to protect information, not 
overburden appeals entities, and provide for transparency and 
accountability in the appeals process. Finally, in response to comments 
regarding reimbursement for costs associated with compliance with Sec.  
155.550(b), we note these comments are outside the scope of the 
proposed rule.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.550 of the 
proposed rule with the following modifications. We are modifying the 
title of Sec.  155.550(b) to read ``Public access to the appeal 
decision,'' thereby limiting the scope of public access to decisions 
and not full appeal records. Similarly, we are modifying the text of 
Sec.  155.550(b) by replacing ``records'' with ``decisions'' to specify 
that the public will only have access to appeal decisions, subject to 
all applicable Federal and State laws regarding privacy, 
confidentiality, disclosure, and personally identifiable information.
l. Employer Appeals Process (Sec.  155.555)
    In Sec.  155.555, we proposed that an appeals process be 
established through which an employer may appeal, in response to a 
notice under Sec.  155.310(h) regarding an employer's potential 
liability for the shared responsibility payment under section 4980H of 
the Code, a determination that the employer does not provide minimum 
essential coverage through an eligible employer-sponsored plan or that 
the employer does provide such coverage but it is not affordable 
coverage with respect to the employee referenced in the notice. We 
proposed that a State Exchange has the flexibility to establish an 
appeals process for employers and, if the State chooses not to 
establish an employer appeals process, that HHS would provide the 
process. Unlike individual eligibility appeals, we did not propose that 
employers be allowed to escalate an appeal to HHS if the employer is 
dissatisfied with the appeal decision of a State Exchange appeals 
entity.
    We proposed the process and standards for requesting an appeal and 
the standards for providing notice of the appeal request to the 
employee and to the Exchange. We proposed requirements for transmitting 
and receiving information related to the appeal between the Exchange 
and the appeals entity. We proposed standards for dismissing employer 
appeals and a process for an employer to request that a dismissal be 
vacated. We proposed the procedural rights of the employer, including 
the scope of information the employer may review as part of the appeal 
and the requirement that the Exchange and appeals entity may not share 
an employee's tax information with an employer. Finally, we proposed 
standards for adjudication of the appeal, the content and notice of the 
appeal decision, implementation of the appeal decision, and the appeal 
record.
    Comment: One commenter recommended that Exchanges coordinate the 
notice under Sec.  155.310(h) with the IRS. The commenter suggested 
that notices from an Exchange regarding employer liability will cause 
confusion for employers and unnecessary administrative burden on the 
Exchange. The commenter recommended a process where the Exchange 
verifies an employer's tax liability with the IRS prior to the delivery 
of any liability notice to an employer.
    Response: We maintain the existing language in Sec.  155.310(h), 
which specifies that when an employee has been determined eligible for 
advance payments of the premium tax credit or cost-sharing reductions, 
the Exchange will notify the employee's employer, in accordance with 
section 1411(e)(4)(B)(iii) of the Affordable Care Act. Specifically, 
Sec.  155.310(h) provides that the notice to the employer will: (1) 
Identify the employee; (2) indicate that the employee has been 
determined eligible for advance payments of the premium tax credit; (3) 
indicate that if the employer has 50 or more full-time employees, the 
employer may be liable for the payment assessed under section 4980H of 
the Code; and (4) notify the employer of the right to appeal the 
determination. IRS will be determining employer liability under section 
4980H of the Code after tax returns are filed. We clarify that for 
efficiency in operations, the Exchange can either send the employer 
notice under Sec.  155.310(h) on an employee-by-employee basis as 
eligibility determinations are made, or send it to employers for groups 
of employees. We also note that the Exchange should adjust notice 
language to reflect that the employer will not be liable for the 
payment assessed under section 4980H of the Code for 2014.
    Comment: We received a comment sharing concern about the potential 
impact on employees of a decision that the employer coverage is both 
affordable and meets minimum value standards, resulting in the employee 
being redetermined ineligible for advance payments of the premium tax 
credit and cost-sharing reductions. Specifically, the commenter noted 
that because of limited open enrollment periods, such an employee might 
not be able to enroll in the health coverage offered by the employer 
when the employer appeal decision is issued. The commenter recommended 
that employees in this circumstance be allowed to stay in a QHP and 
continue to receive advance payments of the premium tax credit and 
cost-sharing reductions until the next opportunity to enroll in the 
employer plan. The commenter argued that because the Exchange initially 
determined that the employer coverage was unaffordable at the time of 
the employee's eligibility determination, the safe harbor provisions in 
section 1.36B-2(c)(3) of the Code should apply to employees at 
reconciliation. The commenter suggested that the Exchange should 
complete a full redetermination of the employee's eligibility when an 
employer's appeal is successful to ensure that the employee may 
continue to receive any benefits under insurance affordability programs 
for which he or she may qualify.
    Response: We encourage employers to educate their employees about 
the details of health coverage offered to them and to assist employees 
in providing information regarding the employer-sponsored coverage 
available to the employee through the Employer Coverage Tool as part of 
the single-streamlined application. Additionally, employers should use 
the Fair Labor Standards Act (FLSA) notice to provide information to 
employees. Accurate information about employer-sponsored coverage 
available to the employee helps the Exchange make an accurate 
determination of the employee's eligibility for insurance affordability 
programs. If an employee is determined eligible for advance payments of 
the premium tax credit or cost-sharing reductions, the employer appeal 
is the opportunity for an employer to correct information about 
employer-sponsored coverage offered to the employee and for the 
Exchange to use any additional relevant information provided by the

[[Page 54114]]

employer to confirm that the employee's eligibility determination for 
insurance affordability programs is correct. This process will help to 
minimize the employee's potential liability to repay advance payments 
of the premium tax credit that he or she was not eligible to receive, 
and will help to protect the employer from being incorrectly assessed a 
tax penalty. Administration of the reconciliation process, employer 
responsibility payments, and the provisions of section 1.36B-2(c)(3) of 
the Code are under the jurisdiction of the IRS. Finally, we note that 
employers can develop policies to allow an employee to enroll in 
employer-sponsored coverage outside an open enrollment period when the 
employee is redetermined as ineligible for advance payments of the 
premium tax credit or cost sharing reductions as a result of an 
employer appeal decision.
    Comment: We received several comments regarding the option for a 
State Exchange to provide an employer appeals process, or to defer to 
HHS to provide the process, as provided in Sec.  155.555(b). One 
commenter sought clarification about the ability for State Exchanges to 
provide this appeals process. In addition, several commenters requested 
that the final rule provide the option for employers to elevate their 
appeal from a State Exchange appeals entity to the HHS appeals entity, 
similar to the option permitted to individuals in Sec.  155.505. One 
commenter suggested that not providing an option to an employer to 
elevate an appeal to the HHS appeals process, while allowing an 
employee who receives financial assistance through the Exchange to do 
so in an individual appeal, is unfair. The commenter recommended a 
process in which both employers and employees have equal opportunities 
to have appeals heard by the HHS appeals entity. Another commenter 
recommended that HHS establish an employer appeals process for all 
Exchanges, rather than allow Exchanges the option to establish their 
own appeals processes. We also received comment in support of the 
ability for employers to appeal to the HHS appeals process where a 
State Exchange has elected not to establish an employer appeals 
process.
    Response: Unlike the individual eligibility appeals process, the 
Affordable Care Act does not require a Federal process be available to 
hear employer appeals. Therefore, we have provided States the 
flexibility to provide a State Exchange appeals process for employers 
or to defer these appeals to the HHS appeals process. We consider State 
Exchanges that have made the employee's eligibility determination to be 
in the best position to adjudicate an employer's appeal related to that 
determination. However, the HHS appeals process will be available to 
employers in those State Exchanges that elect not to provide an 
employer appeals process. We are finalizing Sec.  155.555(b) as 
proposed.
    Comment: A few commenters expressed concern that giving States the 
option to provide an employer appeals process may result in disparate 
outcomes for employers that operate in multiple States. These 
commenters noted having many State Exchanges adjudicating employer 
appeals will add complexity to the appeals process and administrative 
burden for large employers.
    Response: We generally consider it a best practice, in terms of 
safeguarding efficiency and process integrity, to have appeals heard by 
the entity issuing the eligibility determination concerned in the 
appeal, wherever possible. We also wish to provide State Exchanges 
flexibility regarding the process for adjudicating appeals of 
determinations they have made, given the many operational requirements 
and considerations involved in developing new eligibility and appeals 
processes. Because the final rules provide a uniform process and 
standards by which appeals are adjudicated, we expect appeal decisions 
to be consistently accurate regardless of whether an appeal decision is 
issued by a State Exchange appeals entity or the HHS appeals entity. 
Therefore, we are finalizing Sec.  155.555(b) as proposed, without 
modification.
    Comment: One commenter sought clarification about the timeframe and 
process for how HHS will relay appeals information to State Exchanges 
that choose to delegate employer appeals to HHS.
    Response: The HHS appeals entity and State Exchange appeals 
entities are subject to same requirements set forth in Sec.  155.555. 
If the HHS appeals entity hears an employer appeal from a State that 
does not elect to provide its own employer appeals process, HHS will 
communicate information about the appeal and request information from 
the Exchange through the processes described throughout Sec.  155.555, 
including paragraphs (d), (f), (k), and (l).
    Comment: We received comment recommending that the final rule 
provide employees the right to appoint a representative during an 
employer appeal.
    Response: The proposed rule in Sec.  155.555(b) addressed the 
ability of the employer to designate an authorized representative 
pursuant to the provision in Sec.  155.505(e), but did not expressly 
address the ability of the employee to designate an authorized 
representative. We are modifying Sec.  155.555(b) to remove the 
reference toSec.  155.505(e), retitled ``Representatives,'' because 
Sec.  155.227 does not contemplate representation for employers. 
However, we note that nothing in Sec.  155.555 prevents employers or 
employees from relying on a representative or other assistance from a 
third party during the employer appeal.
    Comment: Similar to the comments we received for Sec.  155.520, we 
received comment expressing concern over the modes proposed to accept 
employer appeal requests, which included via telephone, mail, in 
person, and via the Internet. The comment specifically requested that 
the requirement to accept appeal requests by telephone be removed from 
the final rule or left to State option to reduce the burden on appeals 
entities.
    Response: Consistent with our approach to individual eligibility 
appeal requests in Sec.  155.520(a), we are finalizing Sec.  155.555(c) 
as proposed; however, as we note above, during the first year of 
operations, Exchange appeals entities may use a paper-based process to 
accept employer appeal requests via mail; all other appeal request 
modes may be provided at the option of the appeals entity until the 
second year of operations.
    Comment: We received one comment regarding the intersection between 
acknowledging appeal requests, the ability to cure a defective appeal 
request, and dismissing appeals. The commenter recommended, first, that 
employers be notified of the ability to cure a defective appeal request 
and, second, that HHS permit the appeals entity to impose a reasonable 
deadline for amendment of a defective appeal request. Absent such a 
deadline, the commenter indicated that an appeals entity would not know 
when it could comply with its obligation to dismiss the appeal for 
being invalid under Sec.  155.555(f)(1).
    Response: The proposed rule proposed to require that the appeals 
entity accept an amended appeal request only if the amended request met 
``the requirements of this section [155.555],'' including the timing 
requirements in Sec.  155.555(c). However, we agree that employers who 
submit invalid appeal requests toward the end of the appeal request 
timeframe will likely not have sufficient opportunity to cure the 
defect in their appeal request and resubmit it within the time

[[Page 54115]]

remaining to request an appeal. Therefore, we are finalizing Sec.  
155.555(d)(4) with modification to provide specifically that the 
appeals entity must inform the employer of the ability to cure the 
defect and we have provided appeals entities the flexibility to impose 
a reasonable deadline for submitting an amended appeal request.
    Comment: One commenter recommended that the scope of the employer 
appeals process be limited only to appeals concerning whether the 
employer offered insurance to the employee-applicant that constitutes 
minimum value, and the employee share of the premium cost. The 
commenter suggested that appeals concerning whether the coverage was 
affordable implicates confidential information about the employee's 
income and should not be a part of the employer appeal because the 
employer does not have access to the employee's household income 
information.
    Response: The scope of employer appeals process is defined 
consistent with the requirements of section 1411(f)(2) of the 
Affordable Care Act, which requires an appeal process for employers 
that are notified there has been a determination that the employer does 
not provide minimum essential coverage through an eligible employer-
sponsored plan, or that the employer does provide that coverage but it 
is not affordable coverage with respect to an employee. We have 
delineated standards for an appeals process that comports with this 
requirement. Section 155.555(g) explains the information an employer 
may review as part of an employer appeal, and Sec.  155.555(h) 
safeguards employee information, including the confidential income 
information about which the commenter expressed concern, by requiring 
that neither the Exchange nor the appeals entity may disclose an 
employee's tax return information to an employer. These provisions 
adequately protect confidential employee information during the 
employer appeal process. We are finalizing the provisions of Sec.  
155.555 as proposed in this regard.
    Comment: Several commenters opposed the requirement in Sec.  
155.555(g)(2)(iii) that the appeals entity must provide the employer an 
opportunity to review ``other data used to make the determination 
described in Sec.  155.305(f) or (g) to the extent allow by law.'' The 
commenters suggested that ``other data'' is overly broad and makes it 
unclear whether the employer has the right to review eligibility 
information for the employee or the employee's entire household. The 
commenters recommended deleting Sec.  155.555(g)(2)(iii).
    Response: Section 1411(f)(2)(A)(ii) of the Affordable Care Act 
requires that an appealing employer be provided ``access to the data 
used to make the determination [about the employer's failure to provide 
qualifying coverage or affordable qualifying coverage] to the extent 
allowable by law.'' The statutory limitation is reflected in the 
regulatory text we are finalizing in this final rule at Sec.  
155.555(g). As noted in the preamble to the proposed rule at 78 FR 
4655, the amount of information an employer may access is limited, 
including by section 1411(f)(2)(B) of the Affordable Care Act, which 
generally prohibits disclosure of taxpayer return information with 
respect to an employee in the course of an employer appeal. 
Accordingly, the employer's right to review information about the 
employee's eligibility is minimal, as noted in Sec.  155.555(g) and 
(h). We are finalizing the provisions of Sec.  155.555(g) and (h), as 
proposed.
    Comment: We received many comments supportive of Sec.  155.555(h), 
in which we proposed that the Exchange and the appeals entity may not 
share tax return information with an employer in the course of an 
employer appeal.
    Response: We are finalizing the provisions of Sec.  155.555(h) 
without modification. As noted above, the scope of information 
available to an employer as part of the appeal is limited by section 
1411(f)(2) of the Affordable Care Act and implementing regulations. 
Safeguarding personal information provided as part of the eligibility 
determination process is an integral aspect of all Exchange processes.
    Comment: We received a comment regarding the standards proposed for 
the officials reviewing employer appeals. One commenter recommended 
deleting the term ``implicated in the appeal'' in Sec.  155.555(i)(1) 
because the phrase may become a possible point of legal dispute in 
subsequent judicial reviews. The commenter noted that a court may 
overturn an Exchange decision on strictly procedural grounds because an 
official was in some arguable way involved in the Exchange 
determination that is subject to the appeal.
    Response: This provision helps ensure an independent and unbiased 
review of the employer appeal. We are finalizing the provision as 
proposed.
    Comment: One commenter sought modification of the provision for the 
appeal standard of review. The commenter recommended that the de novo 
standard should be used unless the appeals entity finds that a de novo 
hearing would not be needed.
    Response: We disagree that the standard of review should be at the 
discretion of the appeals entity. We believe it is in the best interest 
of the employer, employee, and the appeals entity to use a consistent 
standard that does not give deference to prior decisions in the same 
matter. This standard protects the integrity of the process and helps 
ensure that the appeal will receive fair review. We are finalizing the 
provision as proposed.
    Comment: We received many comments in response to the two options 
we proposed in preamble regarding the employee's ability to appeal a 
redetermination following an employer appeal decision. Comments were 
received in support of both options, but the majority favored allowing 
the employee to appeal the redetermination. Those in favor of allowing 
the employee to appeal highlighted that while an employee can 
participate in the appeal, he or she may not understand the 
significance of the process until he or she receives a redetermination 
notice. Also, while the employee has the opportunity to participate in 
the employer appeal, other family members do not and may not understand 
the impact of the appeal until redetermination occurs. Conversely, 
other commenters saw the ability to submit evidence as part of the 
employer appeal as sufficient to safeguard the employee's due process 
rights.
    Response: In response to the comments received, we are modifying 
the final rule to permit employees whose eligibility is redetermined as 
a result of an employer appeal to appeal that redetermination in 
accordance with the provisions governing individual eligibility appeals 
in subpart F of part 155. We do not anticipate many appeals as a result 
of this provision, but we consider it important to provide the appeal 
right to the employee and his or her household members because they may 
not understand the potential impact of an employer appeal at the time 
when the employee has the opportunity to participate. Furthermore, the 
appeal provides the employee's household members the opportunity to 
dispute a redetermination that occurs as a result of an employer appeal 
process about which they may not have been aware and that did not 
provide for their participation. Finally, should an appeal of a 
redetermination find an employee eligible for the advance payment of 
the premium tax credit and cost-sharing reductions, thus implicating 
potential employer liability a second time, the employer will have 
recourse through the IRS appeals process if a penalty is later

[[Page 54116]]

levied, consistent with section 1411(f)(2)(A) of the Affordable Care 
Act.
    Comment: Regarding the ability for employers and employees to 
appeal the same determination, a commenter sought clarification as to 
the sequencing of the employer appeals process if the employee also 
appeals his or her eligibility determination through the individual 
appeals process.
    Response: An employee determined eligible for financial assistance 
through the Exchange may appeal that determination through the 
individual appeals process pursuant to the requirements in 45 CFR part 
155, subpart F. Because of the employer notification required in some 
circumstances under Sec.  155.310(h), it is possible that an employee 
and an employer could request appeals concerning the same eligibility 
determination simultaneously, although we note that this is likely to 
be a rare occurrence. We did not address this situation in the proposed 
rule and we decline to do so in the final rule. Instead, we provide 
flexibility to the State Exchange to determine how best to sequence the 
appeals.
    Comment: We received support for our approach to notices in the 
employer appeals provisions. One commenter particularly supported the 
proposed content required for the notice of appeal decision in Sec.  
155.555(k), including the requirement for the notice to include an 
explanation of the appeal decision, factual findings relevant to the 
decision, and citations to the relevant regulations that support the 
decision. The commenter also supported the preamble discussion about 
the need to educate employers about the purpose and scope of the 
Exchange appeal versus actions taken by the IRS regarding assessment of 
the employer shared responsibility payment. In addition, the commenter 
appreciated the preamble discussion about developing notices to help 
employers understand their potential tax liabilities.
    Response: We are finalizing the notice provisions as proposed. We 
also note that a paper-based process, as discussed above, is acceptable 
for the first year of operations with regard to notices.
    Comment: We received comments recommending that an employee whose 
eligibility may be affected by the outcome of an employer appeal be 
granted more substantial rights in the employer appeal proceeding, 
including the right to review the full record before submitting 
additional evidence.
    Response: We are finalizing the rule as proposed with regard to the 
procedural rights of the employee and employer. We have not included 
additional provisions allowing either party to view or respond to the 
information submitted by the other. Only limited information is 
relevant to an employer appeal such as, information about what coverage 
(if any) the employer makes available to the employee and what the cost 
of such coverage (if any) is to the employee. We expect the notices 
sent by the Exchange or appeals entity to the employer and the employee 
to make clear that only information addressing these items is relevant 
to the employer appeal. We also expect that the employee already will 
have submitted all or nearly all available, relevant information as 
part of the eligibility determination process; however, we anticipate 
that communications from the Exchange and appeals entity will help the 
employee understand the information that the appeals entity will be 
considering, and what additional information it might be helpful for 
the employee to submit. We note that, as relevant to household income, 
the employer will only be in a position to submit information about 
compensation the employer pays to the employee concerned. Moreover, as 
explained in preamble to Sec.  155.555(k), the employee and members of 
his or her household, if applicable, will have the right to appeal a 
redetermination that results from an employer appeal decision, which is 
an important additional protection for the due process rights of the 
employee and members of his or her household, if applicable. If the 
employee or a member of the employee's household does appeal the 
redetermination, he or she will have access to the information used in 
that redetermination, which will include information about employer-
sponsored coverage.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.555 of the 
proposed rule with the following modifications. In Sec.  155.555(b), we 
are removing the references to Sec.  155.505(e) to eliminate the cross-
reference to standards for representatives that do not contemplate 
application to employers.
    In Sec.  155.555(d)(4), we are modifying the language using three 
subparagraphs to provide additional detail about the process for an 
appeals entity to send a notice of an invalid appeal request to an 
employer. Paragraph (d)(4) provides, ``[p]romptly and without undue 
delay send written notice to the employer of an appeal request that is 
not valid because it fails to meet the requirements of this section. 
The written notice must inform the employer--[.]'' Subparagraph 
(d)(4)(i) has been modified to require the notice inform the employer 
``[t]hat the appeal request has not been accepted[.]'' We are modifying 
subparagraph (d)(4)(ii) to require the notice inform the employer 
``[a]bout the nature of the defect in the appeal request[.]'' New 
subparagraph (d)(4)(iii) requires the notice inform the employer 
``[t]hat the employer may cure the defect and resubmit the appeal 
request by the date determined under paragraph (c) of this section, or 
within a reasonable timeframe established by the appeals entity.'' 
These changes mirror similar modifications made in the individual 
Exchange eligibility appeals provisions.
    We are modifying paragraph (f)(3) to include ``as to'' before 
``why,'' and paragraph (j)(1) to include ``of this section'' after 
``paragraph (i)(2).'' In paragraph (l), we are modifying the provision 
by adding ``and the eligibility of the employee's household members, if 
applicable,'' for additional clarity. Finally, we are modifying Sec.  
155.555(k)(2) to require the inclusion of additional content in the 
notice of employer appeal decision to the employee, specifically ``[a]n 
explanation that the employee and his or her household members, if 
applicable, may appeal a redetermination of eligibility that occurs as 
a result of the appeal decision.'' This modification reflects our 
policy to provide an employee or a member of an employee's household, 
if applicable, who receives an adverse redetermination of eligibility 
as a result of an employer appeal, the ability to appeal that 
redetermination through the process provided in 45 CFR part 155, 
subpart F.
7. Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    We proposed to amend Sec.  155.700 by defining ``SHOP application 
filer'' to mean an applicant, an authorized representative, an agent or 
broker of the employer, or an employer filing for its employees where 
not prohibited by other law.
    Comment: Several commenters to proposed Sec.  155.700 supported the 
amendment of the definition of ``SHOP application filer'' to include 
entities that have traditionally assisted employees in filing 
applications to provide such assistance, such as authorized 
representatives, agents or brokers of an employer, or an employer on 
behalf of its employees. One commenter recommended adding Navigators to 
the definition.

[[Page 54117]]

    Response: We disagree with the commenter that Navigators should be 
included in the definition of ``SHOP application filer.'' Navigators 
can provide important assistance in helping an employer or employee in 
filling out an application, but generally speaking a Navigator cannot 
actually file the application for an employer or employee because under 
existing guidance, a Navigator generally cannot select a QHP for an 
applicant--an inherent aspect of filing a SHOP applications.
Summary of Regulatory Changes
    We are finalizing the provision as proposed.
b. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we re-proposed a new paragraph (c) to coordinate 
SHOP functions with the functions of the individual market Exchange for 
determining eligibility for insurance affordability programs with an 
exemption for a State operating a SHOP independently of an individual 
market Federally-facilitated Exchange. Specifically, we proposed that 
except in the case where a State is operating only a SHOP, a SHOP must 
provide data to the State's corresponding individual market Exchange 
related to eligibility and enrollment of qualified employees in the 
SHOP. This data sharing may improve the accuracy of the individual 
market Exchange's eligibility determinations for affordability 
programs.
    In Sec.  155.705(d), we proposed that when a State establishes and 
operates a SHOP independently of an individual market Federally-
facilitated Exchange, the SHOP would have the flexibility to allow SHOP 
Navigators to fulfill their statutory and regulatory obligations under 
section 1311(i) of the Affordable Care Act and 45 CFR 155.210 to 
facilitate enrollment in QHPs, and to refer consumers with complaints, 
questions, and grievances to applicable offices of health insurance 
consumer assistance or ombudsmen, by referring small businesses to 
agents and brokers for these types of assistance, so long as State law 
permits agents and brokers to carry out these functions.
    We intend to finalize proposed Sec.  155.705(b)(6)(i) in future 
rulemaking when we finalize the provisions proposed in Sec.  156.80(d) 
regarding the frequency of rate updates in the small group market, 
including coverage offered through the SHOPs.
    Comment: Some commenters to proposed Sec.  155.705(c) opposed the 
exemption from the requirement for SHOPs to share eligibility and 
enrollment information of qualified employees with the individual 
market Exchange in States that operate only a SHOP. Commenters believe 
that such coordination is necessary even in a bifurcated model where 
different entities are operating the SHOP and individual market 
Exchanges.
    Response: We note there are technical challenges to seamlessly 
transmitting such information where the individual market Exchange is 
Federally operated and the SHOP is State-operated. Additionally, an 
individual market Federally-facilitated Exchange will still have the 
capability to retrieve the necessary individual application and 
enrollment information through other methods, such as paper 
notifications. As such, we are finalizing this provision as proposed.
    Comment: Some commenters to proposed Sec.  155.705(d) opposed 
allowing certain Navigator duties in the SHOP to be fulfilled through 
referrals to agents and brokers, because they thought this would weaken 
standards for Navigators by reducing Navigators' role in assisting 
small businesses. Some commenters were concerned that some small 
businesses would not have adequate assistance enrolling and maintaining 
coverage that meets their needs in States that took this option. These 
commenters recommended that all Navigators must perform all the 
Navigator duties. If the proposed policy is retained, some commenters 
recommend that States that take this option be required to demonstrate 
how the other Navigator duties will be provided. Other commenters 
supported the provision as proposed.
    Response: Navigators in State SHOP-only Exchanges will still 
perform directly the duties set forth in 45 CFR 155.210(e)(1), (2), and 
(5), namely conducting public education activities; providing 
information and services in a fair, accurate, and impartial manner; and 
providing information in a culturally and linguistically appropriate 
manner and ensuring access for individuals with disabilities. SHOP 
Navigators in such Exchanges will also be required to comply with 45 
CFR 155.210(e)(3) and (4) by providing appropriate referrals to state-
licensed agents or brokers for consumers seeking help with selection of 
a QHP or seeking a referral of a complaint, question, or grievance to 
applicable offices of health insurance consumer assistance or 
ombudsmen. The individual market Exchanges in States operating only a 
SHOP Exchange that elect this option will be Federally-facilitated, and 
HHS will award and manage the grants to those individual market 
Navigators who will be required to perform directly all the duties set 
forth in 45 CFR 155.210(e).
Summary of Regulatory Changes
    We are finalizing 155.705(c) and (d) as proposed.
c. Application Standards for SHOP (Sec.  155.730)
    In Sec.  155.730, we proposed amending the SHOP application filing 
standard to relieve SHOPs of having to accept paper applications and 
accept applications by telephone. In proposed 155.730(f), we also 
clarified that an employer or an employee application may be filed by a 
``SHOP application filer.''
    Comment: Some commenters to proposed Sec.  155.730 opposed the 
amendment that would no longer require SHOPs to accept paper 
applications or applications by telephone. Commenters were concerned 
that this proposal would disproportionately harm low-wage, rural, 
minority, and immigrant businesses and would be unfriendly to 
consumers, especially those without access to computers, resulting in 
decreased accessibility to the SHOP. Some commenters recommended 
delaying the provision for a year. One commenter supported the 
proposal.
    Response: We believe that small businesses and employees have 
options to use in-person assisters, such as Navigators, agents, or 
brokers for help in completing a SHOP application when a paper or 
telephone option is not available. Additionally, we believe that making 
paper and telephone applications optional provides States with more 
flexibility to receive applications in a way that makes the most sense 
for the State's applicants, and that this flexibility could reduce 
operational costs. Finally we believe the inherent limitations of paper 
applications, such as the inability to provide real time rate quotes 
and to complete the enrollment process at the same time the application 
is completed, may lead to low usage of paper applications.
Summary of Regulatory Changes
    We are finalizing the provision with a correction to paragraph (f), 
adding to the final language the provision title ``Filing'' that is in 
current regulation but was mistakenly omitted from the proposed rule.
d. Termination of Coverage (Sec.  155.735)
    In Sec.  155.735, we proposed that each SHOP would be required to 
develop uniform standards for the termination of coverage in a QHP, 
clarified the

[[Page 54118]]

authority for SHOPs to establish termination standards, and set such 
standards for the FF-SHOP.
    Comment: Many commenters supported proposed Sec.  155.735 on 
terminations and grace periods. One commenter recommended that we 
clarify termination and reinstatement policies and recommended that 
SHOPs establish different standards depending on whether a 
participating employer offers its employees only one comprehensive 
medical plan or all plans at one metal level. One commenter requested 
that we clarify which termination and grace period provisions would be 
effective in 2014.
    Response: We believe that grace periods and termination procedures 
must be standardized in all FF-SHOPs, even after employee choice is 
implemented in 2015, regardless of whether a participating employer 
offers its employees only one comprehensive medical plan or all plans 
at one metal level. Standardizing the timing, form, and manner of a 
group's termination from the FF-SHOP will simplify the complexity of 
QHP administration while ensuring that an employer offering coverage 
will be subject to uniform, predictable termination policies regardless 
of what coverage options the employer elects to offer its employees. 
Further, creating uniform termination policies for all FF-SHOPs will 
reduce the complexity of systems interactions with QHP issuers and 
therefore ease QHP issuer compliance with FF-SHOP termination polices 
policies.
    In 2014, for the FF-SHOP and States not implementing employee 
choice, Sec.  156.285(d)(1)(i)(B) and (d)(1)(iii)(B) reference the 
requirements in 45 CFR 156.270 as governing termination of coverage.
Summary of Regulatory Changes
    We are finalizing the provision as proposed.
e. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.  
155.740)
    In Sec.  155.740, we proposed standards for SHOP employer and 
employee eligibility appeals We proposed that a State that operates a 
SHOP must provide a SHOP eligibility appeals process and that the HHS 
appeals entity will provide a SHOP appeals process for States that do 
not elect to establish and operate a SHOP. As with employer appeals in 
Sec.  155.555, we did not propose that SHOP employers and employees be 
permitted to elevate an appeal to HHS if the State operates a SHOP and 
provides a SHOP eligibility appeals process.
    We proposed the process and standards for requesting an appeal and 
the standards for providing notice of the appeal request to the SHOP 
employer or employee and to the SHOP. We proposed requirements for 
transmitting and receiving records related to the appeal between the 
SHOP and the appeals entity. We also provided standards for dismissing 
SHOP appeals and providing an opportunity for a SHOP appellant to 
request a dismissal be vacated. We proposed procedural rights for SHOP 
appellants. Finally, we proposed standards for reviewing the appeal, 
the content and notice of the appeal decision, and implementing the 
appeal decision.
    Comment: One commenter supported our proposal to enable SHOP 
employers and employees to appeal determinations of ineligibility even 
though SHOP appeals were not specifically stipulated in section 1411(f) 
of the Affordable Care Act.
    Response: We are finalizing the requirement to provide an 
eligibility appeals process for SHOP employers and employees as 
proposed in Sec.  155.740(b).
    Comment: We received comments about which entity should be 
responsible for providing a SHOP eligibility appeals process. One 
commenter sought clarification as to whether the SHOP appeals process 
can be delegated to HHS. Similarly, one commenter recommended that HHS 
consider performing eligibility appeals for all SHOPs regardless of 
whether the State operates its own SHOP. The commenter noted that 
allowing all States to defer SHOP eligibility appeals to HHS would 
provide for a streamlined appeals process, particularly where States 
take advantage of the flexibility provided in the operation of 
individual and employer appeals processes pursuant to Sec.  155.505(c) 
and Sec.  155.555(b) respectively.
    Response: The entity that determined an employer's or employee's 
eligibility to participate in the SHOP will be in the best position to 
provide an effective appeal of that determination. We anticipate that 
the volume of SHOP appeals will be small, and due to the nature of the 
SHOP eligibility criteria, the appeals will not be complex. In 
addition, the SHOP was designed with flexibility to meet the individual 
needs of States. For example, the SHOP eligibility standards allow for 
a State to require additional verification before providing the 
employer or employee with an eligibility determination. Therefore, we 
anticipate that each SHOP will be in the best position to adjudicate 
SHOP eligibility appeals. We are finalizing the provisions of Sec.  
155.740(b)(1) as proposed.
    Comment: We received comment regarding the proposed requirements 
for accepting SHOP appeal requests. Specifically, one commenter 
expressed concern over the modes proposed for accepting appeal 
requests. The commenter noted that the requirement to accept requests 
by telephone should be removed, or provided only at State option.
    Response: As with the individual eligibility appeals rules we are 
finalizing in subpart F of part 155, we are finalizing Sec.  155.740 as 
proposed; however, as noted above, appeals entities may use a paper-
based process for the first year of operations. By the second year of 
operations, all SHOPs and appeals entities must accept appeal requests 
in accordance with the final rule.
    Comment: We received one comment regarding the intersection between 
acknowledging appeal requests, the ability to cure a defective appeal 
request, and dismissing appeals. The commenter recommended, first, that 
SHOP employers and employees be notified that they can cure a defective 
appeal request and, second, that HHS permit the appeals entity to 
impose a reasonable deadline for amendment of an appeal request. Absent 
such a deadline, the commenter indicated that an appeals entity that 
issued a notice of a defective appeal request will not know when it can 
comply with its obligation to dismiss the appeal for being invalid 
under Sec.  155.740(i).
    Response: We agree that invalid appeal requests submitted toward 
the end of the 90-day appeal request timeframe creates this risk that 
the SHOP employer or employee will not have time to cure the error 
before the 90-day window closes. We are modifying final Sec.  
155.740(g)(3) to specifically provide that the SHOP or appeals entity 
must inform the SHOP employer or employee that they have an opportunity 
to cure the error and may resubmit the appeal request if it meets the 
timeliness requirements of paragraph (f), or within a reasonable 
timeframe established by the appeals entity.
    Comment: Commenters cited operational difficulties in implementing 
retroactive eligibility for the SHOP and requested that retroactive 
eligibility be limited to specific situations. For example, one 
commenter suggested that retroactive eligibility should be permitted 
only for employers already enrolled in coverage, so that issuers will

[[Page 54119]]

not have to cancel coverage for that employer and all of its covered 
employees, and refund payments for claims submitted. Similarly, another 
commenter noted that retroactive effective dates should not be applied 
in the case of an appeal decision that would reinstate an entire group. 
Finally, one commenter requested that initial applicants not be 
permitted retroactive eligibility.
    Response: We anticipate the volume of SHOP appeals, as well as the 
number of SHOP appeals resulting in retroactivity, will be small given 
the minimal and straightforward nature of SHOP eligibility for both 
employers and employees. Because of the SHOP rules provide for rolling 
enrollment, employers who are denied eligibility for the SHOP will have 
the ability to reapply immediately upon receiving a denial, which may 
be quicker than requesting an appeal. For these reasons, we are 
finalizing the requirements as proposed, offering retroactive 
eligibility if an employer or employee is determined eligible upon 
appeal because we consider retroactivity to be an important protective 
feature of the appeals process.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.740 of the 
proposed rule with the following modifications. In paragraph (b)(2), we 
are adding the phrases ``that provides for the establishment of a 
SHOP'' in two places to reflect that some States may establish and 
operate only a SHOP Exchange, while HHS establishes and operates the 
corresponding individual market Exchange. We are also making this same 
addition to Sec.  155.740(f)(1)(ii). In paragraph Sec.  155.740(b)(2), 
we are removing the word ``SHOP'' and leaving the requirement directed 
at the ``appeals entity.'' We are correcting subparagraph (f)(1)(ii) to 
change the period to a semicolon.
    In Sec.  155.740(g)(3)(i), we are modifying the language to provide 
additional detail about what happens when an appeals entity sends 
notice of an invalid appeal request. We are adding three subparagraphs 
to delineate the content requirements, including the addition that the 
notice must include ``an explanation that the employer or employee may 
cure the defect and resubmit the appeal request if it meets the 
timeliness requirements of paragraph (f) of this section, or within a 
reasonable timeframe established by the appeals entity.'' These changes 
mirror similar modifications made in the individual and employer 
appeals provisions in this final rule. Finally, we are modifying 
subparagraph (i)(1)(ii) to remove the reference to (f)(1) and replace 
it with a reference to (f) as a whole.

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

1. Subpart A--General Provisions
a. Definitions (Sec.  156.20)
    We proposed amending 45 CFR 156.20 by adding the definition for 
``Exchanges'' and adding the definitions for ``Delegated entity'' and 
``Downstream entity.''
    We received no direct comment on the definition of ``Exchange,'' 
though we did receive several general comments and comments to Sec.  
155.100 in support of permitting a State to elect to establish just a 
SHOP.
    Comment: One commenter recommended that we broaden the definitions 
of delegated and downstream entities to include nonprofit community-
based organizations whose purpose is health care consumer education and 
advocacy. The commenter expressed concern that the proposed definitions 
contemplate oversight of brokers and agents by carriers that may 
introduce a potential conflict of interest in directly providing 
administrative services or health care services to qualified 
individuals, qualified employers, or qualified employees and their 
dependents.
    Response: We believe that broadening the definitions of delegated 
and downstream entities to include nonprofit community-based 
organizations whose purpose is health care consumer education and 
advocacy could be potentially unduly burdensome, as many nonprofit 
community-based organizations are not currently subject to all 
regulatory requirements applicable to delegated and downstream 
entities, due to the limited applicability of such requirements to the 
activities of these entities. In contrast, the activities of brokers 
and agents are subject to such regulatory requirements.
Summary of Regulatory Changes
    We are finalizing this provision as proposed.
2. Subpart C--Qualified Health Plan Minimum Certification Standards
a. Termination of Coverage for Qualified Individuals (Sec.  156.270)
    As finalized in the Exchange Eligibility and Enrollment Rule,\10\ 
Sec.  156.270 specifies standards for QHP issuers regarding the 
termination of coverage for individuals enrolled in QHPs through the 
Exchange. In paragraph (b), we made a drafting error in providing that 
if a QHP issuer terminates an enrollee's coverage in accordance with 
Sec.  155.430(b)(1)(i), (ii), or (iii), the QHP issuer must, promptly 
and without undue delay, provide the enrollee with a notice of 
termination of coverage that includes the termination effective date 
and reason for termination. Rather, the appropriate cross-reference in 
Sec.  156.270(b) should refer to Sec.  155.430(b)(2)(i), (ii), or 
(iii), in order to accurately describe situations where the QHP issuer 
may terminate an enrollee's coverage, and as such, we make the 
necessary technical correction.
---------------------------------------------------------------------------

    \10\ 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 42160 (July 
15, 2013).
---------------------------------------------------------------------------

Summary of Regulatory Changes
    We make a technical correction in paragraph (b) to appropriately 
refer to situations where the QHP issuer may terminate an enrollee's 
coverage.
b. Additional Standards Specific to SHOP (Sec.  156.285)
    We proposed to amend Sec.  156.285 to ensure that all QHP issuers 
offering coverage in a SHOP comply with the termination of coverage 
requirements proposed at Sec.  155.735 as a condition of certification 
for plan years beginning on or after January 1, 2015, when Sec.  
155.735 will apply to all SHOPs. Some SHOPs may decide to implement 
employee choice and premium aggregation before January 1, 2015, and 
Sec.  155.735 would apply in such SHOPs as an operational requirement.
    Although we did not receive comments directly on this provision, we 
received several comments to proposed Sec.  155.735 regarding SHOP 
termination policies. Those comments are addressed in the discussion of 
Sec.  155.735 above.
Summary of Regulatory Changes
    We finalize the provision as proposed with a technical correction 
to a drafting error in proposed Sec.  156.285(d)(1)(i)(B). Section 
156.285(d)(1)(i)(B) is finalized to properly reference Sec.  156.270(a) 
and not Sec.  155.270.

[[Page 54120]]

3. Subpart D--Federally-Facilitated Exchange Qualified Health Plan 
Issuer Standards
a. Standards for Downstream and Delegated Entities (Sec.  156.340)
    We proposed in Sec.  156.340 standards for delegated and downstream 
entities, similar to existing standards for such entities that contract 
with Medicare Advantage organizations, described at 42 CFR 
422.504(i)(3)-(4). In Sec.  156.340(a), we proposed the general 
requirement that, notwithstanding any relationship(s) that a QHP issuer 
may have with delegated or downstream entities, the QHP issuer 
maintains responsibility for its compliance and the compliance of any 
of its delegated or downstream entities, with all applicable standards, 
including those we proposed at Sec.  156.340(a)(1)-(4). In paragraphs 
(a)(1) through (a)(4), we proposed that the QHP issuer be required to 
comply with Federal standards, specifically the obligations as set 
forth under: subpart C of part 156, which governs QHP minimum 
certifications standards; subpart K of part 155, which governs Exchange 
functions pertaining to QHP certification; subpart H of part 155, which 
governs the Exchange functions of the SHOP; standards in Sec.  155.220 
with respect to assisting with enrollment in QHPs; and standards in 
Sec.  156.705 and Sec.  156.715 for maintenance of records and 
compliance reviews for QHP issuers operating in an FFE and an FF-SHOP.
    In addition, in Sec.  156.340(b)(1)-(2), we proposed that all 
agreements among the QHP issuer's delegated and downstream entities be 
required to specify delegated activities and reporting standards, and 
either provide for revocation of the delegated activities and reporting 
standards, or specify other remedies in instances where HHS or the QHP 
issuer determines that such parties have not performed satisfactorily.
    Furthermore, we proposed in Sec.  156.340(b)(3) that all agreements 
among the QHP issuer's delegated and downstream entities be required to 
specify that the delegated or downstream entity must comply with all 
applicable laws and regulations relating to the standards specified 
under paragraph (a) of this section. In Sec.  156.340(b)(4), we 
proposed that the QHP issuer's agreement with any delegated or 
downstream entity must specify that the delegated or downstream entity 
must permit access by the Secretary and the OIG or their designees in 
connection with their right to evaluate through audit, inspection, or 
other means, to the delegated or downstream entity's books, contracts, 
computers, or other electronic systems, including medical records and 
documentation, relating to the QHP issuer's obligations in accordance 
with Federal standards under paragraph (a) of this section until 10 
years from the final date of the agreement period.
    Finally, we proposed in Sec.  156.340(b)(5) that all existing 
agreements contain specifications described in paragraph (b) of this 
section by no later than January 1, 2015. For agreements that are newly 
entered into as of October 1, 2013, we proposed an effective date for 
the specifications described in paragraph (b) of this section to be no 
later than the effective date of the agreement.
    Comment: One commenter suggested that health plans have the 
flexibility to ensure compliance with all applicable requirements, 
rather than requiring compliance with all existing Exchange regulatory 
requirements. Furthermore, the commenter recommended that health plans 
have the ability to tailor their agreements to the scope of the 
entity's work for the issuer.
    Response: In Sec.  156.340(a), we proposed that a QHP issuer 
maintains responsibility for its compliance and the compliance of any 
of its delegated or downstream entities, as applicable, with all 
applicable standards. We believe that the proposed inclusion of ``as 
applicable, with all applicable standards'' in this section of the 
regulation addresses the commenter's suggestion. In addition, we 
believe that the regulation allows a health plan to tailor its 
agreement with a delegated or downstream entity to the scope of the 
entity's work for the issuer.
    Comment: One commenter expressed concern that the proposed 
effective date of October 1, 2013, is too soon for compliance with 
specifications described in paragraph (b) of this section, for the 
reason that issuers may not know by that time which downstream and 
delegated entities with which they will enter into contracts to meet 
QHP requirements.
    Response: In Sec.  156.340(b)(5), we proposed that all existing 
agreements contain specifications described in paragraph (b) of this 
section by no later than January 1, 2015 for existing agreements, and 
no later than the effective date of the agreement for agreements that 
are newly entered into as of October 1, 2013. We believe that the 
proposed inclusion of ``no later than the effective date of the 
agreement for agreements that are newly entered into as of October 1, 
2013,'' addresses the commenter's concern, in that the effective date 
of compliance with specifications described in paragraph (b) becomes 
the effective date of the agreement for agreements newly entered into 
after October 1, 2013.
    Comment: Two commenters urged CMS to rescind the proposed 
regulations under Sec.  156.340(b), expressing concern that such 
requirements would unduly burden physician and medical group practices 
and negatively affect access to care.
    Response: In Sec.  156.340(b), we proposed that all agreements 
among a QHP issuer's delegated and downstream entities, including 
entities that provide health care services, be required to specify: 1) 
Delegated activities, reporting responsibilities; 2) and remedies for 
noncompliance; 3) mandatory compliance with all applicable laws and 
regulations related to the QHP issuer's obligations under 156.340(a); 
and 4) permission for the Secretary, OIG, or their designees to audit 
or inspect the entity's books, contracts, computers, or other 
electronic systems, including medical records and documentation, 
relating to the QHP issuer's obligations under 45 CFR 156.340(a) for 10 
years from the final date of the agreement period. In Sec.  156.340(a), 
we proposed that a QHP issuer maintains responsibility for its 
compliance and the compliance of any of its delegated or downstream 
entities, as applicable, with all applicable standards. We believe that 
the proposed inclusion of ``as applicable, with all applicable 
standards'' in this section of the regulation means that health care 
providers that have entered into agreements with QHP issuers must 
comply with only those QHP standards that would be directly applicable 
to health care providers. We agree with the commenters that health care 
providers generally not be subject to many of the requirements for QHP 
issuers in the FFEs, unless the QHP issuer has delegated its 
responsibilities to the health care provider.
    Comment: Many commenters strongly supported the proposed provisions 
of Sec.  156.340, stating that the provisions provide greater support 
for the enforcement of Federal standards that protect consumers, 
including nondiscrimination protections that ensure equal access to 
care and coverage.
    Response: We agree that the provisions will implement greater 
protections for consumers to receive equal access to care and coverage.
Summary of Regulatory Changes
    We are finalizing the provision as proposed.

[[Page 54121]]

4. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
a. Available Remedies; Scope (Sec.  156.800)
    In Sec.  156.800, we proposed that HHS may impose civil money 
penalties (CMPs) on QHP issuers that are not in compliance with FFE 
standards and decertify QHPs offered by non-compliant QHP issuers. We 
sought comments on the use of these proposed compliance tools.
    Comment: We received a comment requesting a moratorium on 
enforcement actions and a two year enforcement safe harbor for QHP 
issuers acting in good faith to comply with QHP requirements. The 
commenter explained that the safe harbor would give stakeholders 
additional time to come into compliance with FFE standards and the 
moratorium would allow HHS extra time to make sure that its technology 
and program infrastructure are working appropriately. Separately, we 
received another comment requesting a one year good faith enforcement 
safe harbor.
    Response: QHP issuers are expected to be in compliance with 
standards applicable to QHP issuers at the time of certification and on 
an ongoing basis. As we stated in the preamble to the proposed rule, we 
expect QHP issuers in the FFEs to cooperate with HHS in resolving any 
issues of non-compliance that are identified during the plan benefit 
year. We also noted that HHS would take enforcement actions only in 
egregious circumstances and as such, we expect few, if any, 
decertifications, especially in the first year.
    In response to the comments received, we now modify the regulation 
text to clarify that if CMS is able to determine that an issuer 
offering QHPs in an FFE is making good faith efforts to comply with 
Exchange standards applicable to issuers offering QHPs in the FFEs, we 
will not, under this subpart, seek to impose CMPs, or initiate 
decertifications during 2014. At the appropriate time we will consider 
extending this good-faith compliance through 2015.
    We note that the determination of good faith may require issuers to 
allow CMS to conduct reviews of QHP materials and to make good faith 
efforts to comply with plans of correction. We will coordinate closely 
with States to avoid unnecessary duplication of monitoring and 
oversight efforts.
Summary of Regulatory Changes
    We are adding a new paragraph (c) to Sec.  156.800 to implement the 
good faith compliance policy described above.
b. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec.  156.805)
    In Sec.  156.805, we proposed the bases and process for imposing a 
CMP in FFEs. We received general comments supporting our proposed 
enforcement of FFE standards through CMPs and decertifications but did 
not receive any comments regarding the specific bases for CMPs.
Summary of Regulatory Changes
    We are making technical edits to Sec. Sec.  156.805(d)(1)(v) and 
156.805(e)(3) to reflect that the proposed administrative hearing 
process for enforcement actions under subpart I is not being finalized 
in this rule. We are finalizing the rest of this section as proposed.
c. Bases and Process for Decertification of a QHP Offered by an Issuer 
Through the Federally-Facilitated Exchanges (Sec.  156.810)
    In Sec.  156.810, we proposed the bases for decertifying QHPs in 
the FFEs and standard and expedited processes for decertification. We 
proposed that when decertification is based on Sec.  156.810(a)(7), (8) 
or (9), HHS may pursue the decertification on an expedited process. We 
sought comments on whether additional bases should be added.
    Comment: We received comments in support of our proposed bases for 
decertification and the separate processes for standard and expedited 
decertification. One commenter recommended that we add Sec.  
156.810(a)(4) to the grounds for expedited decertification, citing the 
negative impacts that repeated, systematic, and willful violation of 
this standard would have on enrollees. We did not receive any comments 
opposing these two proposed processes.
    Response: We proposed in Sec.  156.810(a)(4) that a QHP may be 
decertified on the basis that the QHP issuer substantially fails to 
comply with the standards regarding advance payments of the premium tax 
credit and cost-sharing in Subpart E of Part 156. We agree with the 
commenter that violation of this standard may have negative impacts on 
enrollees; however, we envision expedited decertification to be 
reserved for the most serious instances of non-compliance that could 
present a risk to enrollees' ability to access needed health items or 
services and those that may substantially compromise the integrity of 
an FFE. After careful consideration, we will not add Sec.  
156.810(a)(4) to the bases for expedited decertification at this time; 
however, we will continue to assess the appropriateness of adding this 
as a basis for expedited decertification.
    Comment: One commenter recommended that rather than pursuing 
decertification when a QHP issuer substantially fails to meet the 
requirements under Sec.  156.230 related to network adequacy standards, 
or Sec.  156.235 related to the inclusion of essential community 
providers, HHS require QHP issuer networks to include a number of 
advanced practice registered nurses that is no less than 10 percent of 
the number of independently practicing advanced practice registered 
nurses enrolled as Medicare Part B providers who have provided one or 
more services to Medicare fee-for-service beneficiaries in the most 
recent year for which CMS provider data are available.
    Response: We will continue assessing whether it is appropriate to 
require QHP issuers to contract with certain health care providers but 
not others as a certification requirement, but will be not make this 
change to the certification requirements at this time.
Summary of Regulatory Changes
    We are making a change to Sec.  156.810(e) to reflect that the 
proposed administrative hearing process for enforcement actions under 
subpart I is not being finalized in this rule. We are making a 
technical correction to a typographical error in subparagraph (b)(2) 
and a technical correction to add violation of privacy or security 
standards, proposed as a basis for decertification in the preamble to 
the proposed rule, to the list of bases in the regulation text.
5. Subpart K--Cases Forwarded to Qualified Health Plans and Qualified 
Health Plan Issuers in Federally-Facilitated Exchanges by HHS
a. Standards (Sec.  156.1010)
    We proposed in Sec.  156.1010 to set requirements for resolving 
cases forwarded by HHS to a QHP issuer operating in an FFE. We proposed 
the definition of a case as a communication brought by a complainant 
that expresses dissatisfaction with a specific person or entity subject 
to State or Federal laws regulating insurance, concerning the person or 
entity's activities related to the offering of insurance, other than a 
communication with respect to an adverse benefit determination as 
defined in 45 CFR 147.136(a)(2)(i). For a case forwarded by a State to 
a QHP issuer operating in an FFE, we proposed that the QHP issuer be 
required to comply with applicable State laws and

[[Page 54122]]

regulations. We proposed that cases received by a QHP issuer operating 
in an FFE directly from a complainant or the complainant's authorized 
representative be handled by the issuer through its internal customer 
service process. For cases received by a QHP issuer operating in an FFE 
from HHS, we proposed that the QHP issuer be required to investigate 
and resolve cases, as appropriate, pursuant to the proposed standards 
in Sec.  156.1010.
    In Sec.  156.1010(a), we proposed the definition of a case. In 
Sec.  156.1010(b), we proposed that QHP issuers operating in an FFE 
must investigate and resolve, as appropriate, cases brought by a 
complainant or the complainant's authorized representative and 
forwarded to the issuer by HHS. We proposed that this subsection would 
not apply to adverse benefit determinations as defined in 45 CFR 
147.136(a)(2)(i), which are subject to the regulations governing 
internal claims appeals and external review in 45 CFR 147.136.
    Section 156.1010(c) proposed that cases may be forwarded to a QHP 
issuer operating in an FFE through a casework tracking system developed 
by HHS, or through other means as determined by HHS. Section 
156.1010(d) proposed that cases forwarded by HHS to a QHP issuer 
operating in an FFE must be resolved within fifteen calendar days of 
receipt of the case. We proposed that such cases involving an immediate 
need for health services, as defined in Sec.  156.1010(e), must be 
resolved no later than 72 hours after receipt of the case, unless a 
State law or regulation established a stricter timeframe, which would 
then control.
    In Sec.  156.1010(e) we proposed that an urgent case is one in 
which there is an immediate need for health services because the non-
urgent standard could seriously jeopardize the enrollee's or potential 
enrollee's life, or health or ability to attain, maintain, or regain 
maximum function.
    In Sec.  156.1010(f), we proposed that, for cases forwarded by HHS, 
QHP issuers operating in an FFE are required to provide notice to 
complainants regarding the disposition of a case as soon as possible 
upon resolution of the case, but in no event later than seven business 
days after the case is resolved and that such notification may be by 
verbal or written means as determined most appropriate by the QHP 
issuer. In Sec.  156.1010(g), we proposed that a QHP issuer operating 
in an FFE must document in a casework tracking system developed by HHS, 
or by other means as determined by HHS, that the case has been 
resolved, no later than seven business days after resolution of the 
case, and that the resolution record must include a clear and concise 
narrative explaining how the case was resolved including information 
about how and when the complainant was notified of the resolution.
    In Sec.  156.1010(h) we proposed that cases received by a QHP 
issuer operating in an FFE from a State in which the issuer offers QHPs 
must be investigated and resolved according to applicable State laws 
and regulations and that QHP issuers operating in an FFE must cooperate 
fully with the State, HHS, or any other appropriate regulatory 
authority that is handling a case.
    Comment: Several commenters requested clarification regarding the 
definition of ``case'' and the types of cases that are subject to this 
subsection, and two commenters recommended that this subsection apply 
only to cases related to the advance payments of the premium tax credit 
and cost sharing reductions. Two commenters recommended that cases 
related to any health care services be excluded because they would 
necessarily be subject to the regulations governing internal claims 
appeals and external review in 45 CFR 147.136. Several commenters 
recommended that the definition of ``urgent case'' be expanded to 
include cases in which using the standard timeframe would jeopardize an 
individual's access to coverage.
    Response: In response to comments received, we are adding language 
to Sec.  156.1010(a) to provide that this subsection excludes cases 
related to eligibility determination processes, eligibility appeals, 
and other issues subject to Subpart F of this rule. We agree that some 
cases involving health care services should not be covered by this 
subsection, and explicitly exclude cases otherwise covered by 45 CFR 
147.136. However, we do not agree that this subsection should 
explicitly exclude all cases related to health care services, and we 
also disagree that this subsection should apply only to cases related 
to the advance payments of the premium tax credit and cost-sharing 
reductions. Although complainants may bring some issues regarding 
advance payments of the premium tax credit and cost-sharing reductions 
to HHS' attention that will call for direct resolution or more 
intensive handling by HHS, we believe there are many areas in which HHS 
can act in the consumer's best interest by forwarding the consumer's 
case to the QHP issuer, as appropriate, including cases that may 
involve health care services but in which external review under 45 CFR 
147.136 would not apply. For example, this would include a situation in 
which the consumer contacts HHS because the QHP issuer has denied a 
serviced based on their assessment that the service is not a covered 
service. In this scenario, a consumer may disagree with a QHP issuer's 
determination that the matter is not eligible for external review. 
There are a number of issues--including deductibles, application of co-
payments, and coverage of a specific service--that may not fall within 
the scope of 45 CFR 147.136 for external review purposes, but we 
believe that such cases should also be resolved in a timely fashion.
    We agree with commenters who noted that some cases may qualify as 
urgent even where there is not necessarily an immediate need for health 
services, such as where a consumer encounters difficulties with 
enrollment near the end of an open enrollment period and is put at risk 
of not being able to enroll in coverage in a QHP offered through the 
Exchange. In such cases, it is important that the issuer respond 
quickly so as to not jeopardize consumers' ability to enroll in 
coverage. Accordingly, we are adding language that expands the 
definition of ``urgent case'' to include instances in which the 
standard timeframe for case resolution would jeopardize a consumer's 
ability to enroll in a QHP through the FFE.
    Comment: Several commenters addressed the proposed timeframes and 
notification requirements for the resolution of cases forwarded by HHS 
to QHP issuers operating in an FFE, including two commenters who 
recommended that the timeframes either be removed or lengthened and 
several commenters who supported the proposed timeframes or suggested 
imposing more stringent requirements. One commenter recommended that 
issuers be required to notify a consumer of the resolution of a case in 
writing in order to ensure documentation of the resolution for the 
consumer, and another commenter requested clarification regarding the 
penalties that would apply to a QHP issuer operating in the FFE in the 
event that the issuer does not meet the regulatory timeframes. Several 
commenters requested clarification regarding the information that QHP 
issuers will be required to enter into the tracking system.
    Response: Because we expect that consumer cases may often involve a 
consumer's ability to access to coverage--and, relatedly, health care 
services--on a timely basis, we believe it is important that cases be 
resolved in an expedient manner. We are therefore retaining the 
fifteen-day required response time for consumer cases forwarded by HHS 
to QHP issuers

[[Page 54123]]

operating in an FFE, with the exception of urgent cases as defined in 
this final rule, which require a resolution no later than 72 hours 
after the case is received. We expect QHP issuers operating in an FFE 
to resolve the urgent case as quickly as required by the severity of 
the case, but in no event later than the 72-hour timeframe provided. 
Additionally, we agree with commenters who indicated that a seven-day 
timeframe for notification to the complainant of the resolution of the 
case may create a significant burden on consumers while not 
meaningfully reducing burden on QHP issuers operating in an FFE as 
compared to a shorter timeframe; therefore, in response to these 
comments, we are shortening the case disposition notification 
requirement from seven business days to three business days. We also 
agree with commenters who noted that documentation of the case 
resolution is important for consumers to have, and we are modifying the 
final rule to require issuers to provide consumers with written 
notification of the case disposition. Written notification is not 
required to satisfy the three business day timeframe for case 
resolution notification; verbal notification can be used to meet this 
requirement so long as such notification is followed by written 
notification in a timely manner, pursuant to Sec.  156.1010(f)(2).
    Further, we are restructuring Sec.  156.1010(g), including by 
adding three new paragraphs. We are adding Sec.  156.1010(g)(1) to 
provide that for cases forwarded by HHS, a QHP issuer operating in an 
FFE must use the HHS-developed tracking system to document the date of 
resolution of a case. Section 156.1010(g)(2) contains the proposed 
requirement that a QHP issuer use the HHS-developed tracking system to 
document the case resolution summary no later than seven business days 
after resolution of the case, including a clean and concise narrative 
with specified content. We are also adding Sec.  156.1010(g)(3) to 
provide that for cases forwarded by HHS and which have involved an 
investigation by a State agency, including but not limited to a State 
DOI, a QHP issuer operating in an FFE must use the HHS-developed 
tracking system to document ``any compliance issues identified by the 
State agency implicating the QHP or QHP issuer.''
    We remind QHP issuers operating in an FFE that compliance with all 
applicable Federal standards, including those related to case 
resolution and notification, is a condition for QHP issuers to continue 
participating in an FFE. We expect QHP issuers will make a good faith 
effort to comply with all applicable requirements. As such, as 
described below, during the 2014 plan year, we do not anticipating 
decertifying QHPs under 45 CFR 156.810(a)(1), nor pursuing civil money 
penalties under 45 CFR 156.805(a)(1) for non-compliance with these 
requirements except in the most egregious cases.
    Comment: Several commenters suggested that HHS require States, 
issuers, and Exchanges to provide reports about consumer complaints and 
to make reports about consumer cases and complaints publicly available.
    Response: HHS agrees that data regarding consumer complaints about 
an issuer is a critically important element of issuer oversight, and we 
intend to use the HHS tracking system to provide insight into such 
consumer complaints. HHS anticipates that we will be making reports and 
information publicly available that include analysis of the data we 
have collected in the HHS tracking system. However, we disagree with 
the recommendation that we require all States, issuers and Exchanges to 
provide such information. Many States already produce public reports 
regarding consumer complaints, and additional HHS requirements in this 
area would be duplicative in many instances. Additionally, we believe 
the enrollee satisfaction survey required by section 1311(c)(4) of the 
Affordable Care Act can provide HHS and consumers with the type of 
information that the commenters believe should be made publicly 
available by requiring Exchanges to publish information about enrollee 
satisfaction. HHS will also explore this issue as we receive cases to 
help us determine if requiring additional reporting in the future will 
help increase the effectiveness of issuer oversight.
    Comment: Many commenters recommended changes related to the HHS 
tracking system and processes. Comments included requests for more 
specificity regarding issuer and State access to the system; requests 
for clarification regarding other methods that HHS may use to forward 
cases to QHP issuers operating in an FFE; and recommendations that 
issuers be required to track all consumer cases in the HHS tracking 
system, not simply those forwarded by HHS. We also received requests 
for clarification regarding the process that QHP issuers operating in 
an FFE are required to use to forward cases to the FFE.
    Response: We anticipate that HHS will be using a tracking system 
for forwarding cases to QHP issuers operating in an FFE, and do not 
intend to routinely use alternate mechanisms to do so. However, we 
retain the language about alternate mechanisms in order to allow HHS to 
use other methods if the need arises, such as where the tracking system 
is unavailable for an extended period of time. HHS intends to provide 
limited access to the tracking system to State DOIs in order to ensure 
that departments of insurance are able to access cases that fall under 
their jurisdiction. HHS also intends to provide limited access to the 
tracking system to QHP issuers operating in an FFE to ensure that QHP 
issuers can access cases that concern them on a timely basis so that 
they are able to identify and resolve such cases. We anticipate 
providing more information about access to this system in forthcoming 
guidance.
    HHS acknowledges that issuers will receive cases directly from 
consumers and that such cases could be an important source of data, but 
we are not requiring QHP issuers to track all cases in the HHS tracking 
system. We believe that the enrollee satisfaction survey required by 
Sec.  1311(c)(4) of the Affordable Care Act will be an appropriate way 
to track consumer cases received directly by QHP issuers. Additionally, 
we are not accepting the recommendation that HHS should operate a 
centralized tracking system for all consumer cases because State DOIs 
currently operate independent tracking systems and the creation of an 
additional, centralized system may be duplicative by necessarily 
including information about cases already existing in State tracking 
systems. Although the current model will undoubtedly result in some 
overlap with State systems, there will be a significant number of cases 
that are not accounted for in any State system. Rather than develop one 
centralized system operated by HHS, we will continue to explore ways to 
ensure that multiple systems can interact so that there is minimal 
duplication of cases across systems and that also meets appropriate 
security and privacy standards. Additionally, we will continue to 
monitor these issues to ensure that the HHS and State tracking systems 
as well as the information contained in enrollee satisfaction surveys 
provide HHS and consumers with adequate data about consumer cases to 
assess QHP issuer performance and conduct oversight of QHP issuers 
operating in an FFE.
    For those cases best addressed by the FFE in which a consumer 
directly contacts the issuer, such as cases involving eligibility 
determinations or the amount of an advance premium tax credit, QHP 
issuers operating in the FFE should refer the consumer to the FFE

[[Page 54124]]

Call Center in order to allow the FFE to triage the case and resolve it 
appropriately.
    Comment: Several commenters discussed the privacy and security 
standards related to the HHS tracking system, including an expression 
of opposition to the sharing of any personally identifiable information 
(PII) as well as requests for clarification about the consumer 
permission and consent necessary for the FFE to share case information 
with QHP issuers operating in an FFE and for those issuers to share 
case information with the FFE.
    Response: QHP issuers operating in an FFE are required to meet the 
same privacy and security standards with respect to the HHS tracking 
system that they are required to meet as a condition of offering a QHP 
in an FFE. Additionally, FFEs will obtain consumer consent before 
sharing any information with QHP issuers operating in an FFE or with 
State DOIs in order to resolve the case. We understand concerns about 
the privacy and security of PII, including information about health; 
consumer consent represents a consumer's agreement to have such 
information shared with appropriate entities in order to help resolve 
the consumer's case. When such consent is obtained, the information 
will be shared in a manner that appropriately protects PII and, where 
applicable, personal health information (PHI), so that such information 
is not shared with other entities that should not have access to that 
information. We anticipate that the information shared with the 
appropriate QHP issuer will include the consumer name, contact 
information, and details about the case provided by the consumer to 
HHS.
    Comment: One commenter expressed concern with the proposed approach 
to send consumers to issuers of the QHPs in which they are enrolled in 
cases where the consumer has already reached out to the issuer, and 
another commenter recommended that the proposed processes and 
timeframes apply to all consumer cases in all Exchanges.
    Response: We understand the concern that, in this circumstance, 
this approach might not seem to offer the consumer additional 
assistance. However, our experience with Medicare Advantage and Part D 
complaints has demonstrated that we are often able to facilitate 
tangible results for beneficiaries when HHS sends a case directly to 
the applicable issuer, including in instances where the beneficiary has 
already reached out to the issuer. This approach also allows for a more 
streamlined process in which the consumer's case may be dealt with more 
rapidly than an alternate process calling for intensive HHS involvement 
in every case in which a consumer has already reached out to the 
issuer.
    Additionally, while we understand the argument for consistency 
across all casework systems and processes, and the compromises inherent 
in providing different resolution processes and timeframes for 
consumers depending on where they first report their case, we are not 
expanding this final rule to include Exchange- and QHP-related cases 
other than those which HHS forwards to QHP issuers operating in an FFE 
because we want to respect the State laws and regulations that 
currently apply to such cases. While in the absence of this final rule 
those laws and regulations would also apply to some of the cases that 
HHS forwards to QHP issuers operating in an FFE, we believe it is 
appropriate to establish additional timeframes and processes because 
there may be cases which are not subject to timeframes set forth by 
State laws and regulations, such as cases related to Exchange-specific 
requirements that apply to QHP issuers operating in an FFE.
    Comment: One commenter recommended that the final rule require 
issuers to use processes and means of communication for resolving cases 
that are accessible to individuals with limited English proficiency and 
those with disabilities.
    Response: We agree that it is important for consumers to receive 
assistance and information in a way that they can access and 
understand, including individuals with limited English proficiency and 
individuals with disabilities. However, we are not accepting the 
recommendation to include additional, specific language in this 
regulation because QHP issuers operating in an FFE are already required 
to provide accessible notices to enrollees pursuant to 45 CFR 156.250, 
which applies to communications regarding consumer cases. We will 
monitor this area carefully to assess whether additional guidance is 
necessary in order to ensure that all individuals have adequate and 
appropriate access to the information and tools needed to have cases 
resolved.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.1010 of the 
proposed rule, with the following modifications. We are amending Sec.  
156.1010(a) to provide that this section does not include cases 
otherwise addressed in Subpart F of this rule. In Sec.  156.1010(e), we 
are expanding the definition of ``urgent case'' to include instances in 
which application of the non-urgent standard would jeopardize a 
consumer's ability to enroll in a QHP through the Federally-facilitated 
Exchange. In Sec.  156.1010(f) and new paragraph (f)(1), we are 
requiring issuers to provide notification to consumers about the 
disposition of a case within three business days of the resolution, by 
verbal or written means as determined most appropriate by the QHP 
issuer operating in an FFE. In new paragraph (f)(2), we are requiring 
that in instances when a QHP issuer operating in an FFE notifies the 
consumer about the disposition of a case using non-written means, the 
issuer must provide the consumer with written notification of the 
disposition in a timely manner following the verbal communication. In 
new paragraph (g)(1), we are requiring that a QHP issuer operating in 
an FFE provide the date of resolution of a case in the HHS-developed 
tracking system; Sec.  156.1010(g)(2) contains the proposed requirement 
that a QHP issuer document the case resolution summary no later than 
seven business days after resolution of the case, including a clean and 
concise narrative with specified content; and in new paragraph (g)(3) 
we are requiring that a QHP issuer operating in an FFE provide 
information in the HHS-developed tracking system about any compliance 
issues found as part of an investigation of a case by a State agency, 
including but not limited to a State DOI.
6. Subpart M--Qualified Health Plan Issuer Responsibilities
a. Direct Enrollment With the QHP Issuer in a Manner Considered To Be 
Through the Exchange (Sec.  156.1230)
    We proposed to add paragraph Sec.  156.1230(a)(1)(i) that would 
allow, at the Exchange's option, a QHP issuer to enroll an applicant 
who initiates enrollment directly with the QHP issuer in a manner that 
is considered enrollment through the Exchange if the QHP issuer follows 
the enrollment process for qualified individuals set forth in Sec.  
156.265.
    We proposed paragraph Sec.  156.1230(a)(1)(ii) to ensure that QHP 
issuers that seek to directly enroll qualified individuals in a manner 
considered to be through the Exchange provide applicants the ability to 
view the QHPs offered by the issuer with data elements set forth at 45 
CFR 155.205(b)(1).
    We proposed in paragraph Sec.  156.1230(a)(1)(iii) that QHP issuers 
that seek to directly enroll qualified individuals in a manner 
considered to

[[Page 54125]]

be through the Exchange using the issuer's Web site must clearly 
distinguish between QHPs for which the consumer is eligible and non-
QHPs that the issuer may offer. We proposed that this distinction must 
also clearly articulate that advance payments of the premium tax credit 
and cost-sharing reductions apply only to QHPs offered through the 
Exchange.
    In Sec.  156.1230(a)(1)(iv), we proposed that QHP issuers that seek 
to directly enroll qualified individuals in a manner considered to be 
through the Exchange be required to notify applicants of the 
availability of other QHP products offered through the Exchange to 
consumers, regardless of whether they apply through a Web site, in-
person or by phone. The QHP issuer would also be required to display 
the Web link to or describe how to access the Exchange Web site. We 
sought comment if HHS should require a universal disclaimer to be 
displayed by the issuer that informs applicants that other coverage 
options exist in the Exchange and that not all coverage options are 
displayed.
    In Sec.  156.1230(a)(1)(v), we proposed that a QHP issuer be 
required to ensure that, when an applicant initiates enrollment 
directly with the QHP issuer and the QHP issuer seeks to directly 
enroll the applicant in a manner considered to be through the Exchange, 
the applicant is allowed to select an advance payment of the premium 
tax credit amount, if applicable, in accordance with Sec.  
155.310(d)(2), provided that the applicant makes the attestations 
required by Sec.  155.310(d)(2)(ii).
    In Sec.  156.1230(a)(2), we proposed that, if permitted by the 
Exchange pursuant to Sec.  155.415, a QHP issuer seeking to directly 
enroll applicants in a manner considered to be through the Exchange 
enter into an agreement with the Exchange prior to allowing any of its 
customer service representatives to assist qualified individuals with 
certain application tasks whereby the QHP issuer would agree to require 
each of its customer service representatives to at a minimum: (i) 
Receive training on QHP options and insurance affordability programs, 
eligibility, and benefits rules and regulations; (ii) comply with the 
Exchange's privacy and security standards adopted consistent with Sec.  
155.260; and (iii) comply with applicable State law related to the 
sale, solicitation, and negotiation of health insurance products, 
including applicable State law related to agent, broker, and producer 
licensure; confidentiality; and conflicts of interest. We solicited 
comments on these proposals.
    We also proposed to add Sec.  156.1230(a)(3) to ensure that the 
premium that a QHP issuer charges to a qualified individual or enrollee 
is the same as was accepted by the Exchange in its certification of the 
QHP issuer after accounting for any advance payments of the premium tax 
credit. We proposed that if the QHP issuer identifies an error in the 
amount it has charged the qualified individual, the QHP issuer must 
retroactively correct the error no later than 30 calendar days after 
its discovery. We also proposed that for issuers of QHPs in the FFE, 
HHS may review the premiums charged to qualified individuals through 
the compliance reviews proposed in Sec.  156.715(a).
    Finally, in Sec.  156.1230(b), we proposed that the individual 
market FFEs would permit the conduct set forth in this section, to the 
extent permitted by applicable State law. As stated earlier in the 
preamble, for purposes of clarity, we will refer to ``issuer customer 
service representatives'' as ``issuer application assisters'' for the 
rest of this section.
    We received the following comments concerning the proposed 
enrollment process provisions.
    Comment: Many commenters endorsed the use of a universal disclaimer 
to be displayed by issuers that informs applicants that other coverage 
options exist in the Exchange and that not all coverage options are 
displayed. Almost all the commenters echoed that they believed it was 
important that all applicants understand the coverage options available 
to them. One commenter recommended giving issuers the flexibility on 
how to inform applicants about the availability of other QHPs offered 
through the Exchange and expressed the operational difficulty in adding 
a universal disclaimer.
    Response: In response to all the comments, we agree that a 
universal disclaimer would allow an applicant to make a more informed 
decision by informing applicants where to find information on all 
available QHPs including language that selecting multiple enrollment 
groups and catastrophic plans may only be supported through the FFM. 
Accordingly, we modified Sec.  156.1230(a)(1)(iv) to clarify that 
issuers must use an HHS-approved universal disclaimer about the 
availability of other QHPs offered through the Exchange. We note that 
this disclaimer must be made available to applicants regardless of how 
consumers communicate with the issuer (Web site, phone, in-person, 
etc.). We expect that issuers will make this available at the beginning 
of the plan comparison process and if an applicant is using an issuer's 
Web site, the issuer must prominently display this disclaimer when 
displaying plans to the applicant.
    Comment: We received many comments supporting the proposed consumer 
protections requirements for direct enrollment. However, some 
commenters recommended adding additional disclosures such as informing 
applicants that other coverage options exist, requiring issuers to list 
all QHPs, and information on how to access available Navigators. One 
commenter wanted to eliminate direct enrollment altogether since the 
commenter believed the process would prevent applicants from receiving 
unbiased information from which to choose a health plan that best meets 
their needs.
    Response: We recognize that direct enrollment may cause some 
confusion for the applicant, but believe the value of consumer choice 
outweighs potential confusion. Accordingly, in the final rule, we are 
finalizing Sec.  156.1230(a)(1) to establish consumer protections. As 
explained previously, these protections will now include providing an 
HHS-approved universal disclaimer informing applicants of other 
coverage options. We note that the data elements displayed consistent 
with Sec.  156.1230(a)(1)(ii) must provide the same information as that 
on the Exchange Web site and not all the data elements submitted to the 
Exchange on the issuer's QHP data templates. We do not believe that 
issuers should be required to give information about access to 
Navigators since applicants would have come to the issuer directly and 
direct enrollment would provide one of many ways in which an applicant 
can enroll in a QHP.
    Comment: We received numerous comments on the training requirements 
and standards for issuer application assisters. A number of commenters 
were concerned that direct enrollment could lead to consumer confusion 
and suggested that application assisters go through the same training 
as certified application counselors (CACs). Some commenters recommended 
these individuals meet the same standards as the ones applicable to 
other assisters, such as Navigators, CACs, and agents/brokers, and be 
trained and certified by the Exchange. One commenter recommended that 
issuers be responsible for the requirements related to training.
    Response: We intend for issuers to provide the training to their 
own customer service representatives. We also expect the Exchange to 
provide the agent/broker or other related assister training curriculum 
to issuers so they

[[Page 54126]]

can utilize those materials while conducting their training. We leave 
the decision on whether to establish a program for certifying these 
individuals up to the Exchange. The FFEs do not intend to permit 
issuers to allow their application assisters to perform the assistance 
functions set forth in this section in the first year of Exchange 
operations. We will evaluate whether to implement a certification 
requirement, which would be done through rulemaking, for future years.
    Comment: Some commenters recommended that issuer application 
assisters ensure that individuals who are ineligible for QHPs receive 
the information necessary to follow up with programs that they may be 
eligible for such as Medicaid or CHIP.
    Response: We expect that issuer application assisters who are 
approached by individuals and families looking for assistance with 
Exchange enrollment will work with all applicants, including 
individuals who are ultimately determined to be eligible for Medicaid 
or CHIP. Any applicant who is working with an issuer application 
assister and is determined by an Exchange to be eligible for Medicaid 
or CHIP will receive an appropriate notice of assessment or 
determination of Medicaid/CHIP eligibility from the Exchange. In such 
cases, we expect that the issuer application assister would refer the 
individual to the applicable State agency. We anticipate that issuer 
application assister training will provide information on where to 
direct Medicaid or CHIP-eligible individuals.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.1230 of the 
proposed rule, with a few modifications. We modified language in Sec.  
156.1230(a)(1)(iv) to clarify that issuers must use an HHS-approved 
universal disclaimer about the availability of other QHPs offered 
through the Exchange. We also made a technical correction in paragraph 
(a)(1)(iv) replacing ``or'' with ``and.'' As described in Part C(5) of 
this rule, we will use the term ``issuer application assisters'' in 
place of ``issuer customer service representatives'' to more clearly 
articulate the role of such individuals and for consistency, will refer 
to the definition of ``issuer application assisters'' being finalized 
at Sec.  155.20. We also modified Sec.  156.1230(a)(2) to remove the 
express requirement for an agreement between an issuer and the Exchange 
for its issuer application assisters, but still require that issuers 
ensure their application assisters comply with Sec.  156.1230(a)(2)(i) 
through (a)(2)(iii). Lastly, we are not finalizing subparagraph Sec.  
155.1230(a)(3) regarding premium accuracy requirements at this time 
because we intend to address that provision in future rulemaking.
b. Enrollment Process for Qualified Individuals (Sec.  156.1240)
    We proposed to require that QHP issuers, at a minimum, accept a 
variety of payment formats so that individuals without a bank account 
or a credit card will have readily available options for making monthly 
premium payments. We gave examples of methods including, but not 
limited to, paper checks, cashier's checks, money orders, replenishable 
pre-paid debit cards, electronic funds transfer from a bank account, 
and an automatic deduction from a credit or debit card. We sought 
comment on this proposal and whether other payment methods should be 
included.
    We received the following comments concerning the proposed 
enrollment process provisions.
    Comment: A majority of commenters were in favor of requiring QHP 
issuers to accept methods of payment customarily used by people without 
bank accounts or credit cards. Furthermore, commenters recommended 
codifying in the regulation text the specific payment methods options 
yielding an illustrative list of payment methods. This would ensure 
that issuers accept a range of payment methods instead of just one in 
addition to a bank account or credit card depending on an issuer's 
operations. Other commenters recommended that the rule not require an 
exhaustive list of payment methods, but rather establish a baseline for 
payment methods and allow issuers to include other forms of payment 
based on their market needs.
    Response: We are finalizing a revised Sec.  156.1240(a)(2), which 
lists the payment methods that QHP issuers must accept at a minimum. 
This will provide a range of options for those individual with and 
without banking accounts and/or credit cards. Most issuers already have 
the capability to accept these payment options.
    Comment: We received several comments suggesting that we should 
clarify that QHP issuers must accept the proposed payment methods for 
all premium payments, including the initial premium payment. Commenters 
stated that applicants would not be able to enroll and maintain health 
coverage if their principal payment option is not available for all 
payments. Other commenters recommended using electronic payments for 
initial payments due to longer processing times needed, higher 
transaction fees, and a delay in effectuate coverage for certain 
payment methods.
    Response: The requirement to accept the stated payment methods must 
apply to all payments including initial premium. Interpreting this rule 
any other way would defeat the purpose of this section as explained in 
the proposed rule, because individuals who would benefit from the 
protections in this section would likely not be able to effectuate 
coverage to make monthly premiums thereafter. Issuers should work with 
individuals to make them aware that certain payment methods take longer 
to process and plan accordingly. In this final rule, we are finalizing 
a revised Sec.  156.1240(a)(2), which clarifies that this provision 
applies to all payments.
    Comment: We received a comment to clarify whether this is a 
requirement in all Exchanges and whether this is specific to the 
individual market.
    Response: This provision applies only in the individual market and 
we have indicated this in Sec.  155.1240(a)(2) of the final rule. We 
also note that this applies to all Exchanges, including State 
Exchanges.
    Comment: One commenter recommended that we avoid partnering with 
payment service companies that will profit from payment fees since some 
pre-paid debit cards and money transfer programs require additional 
fees to consumers. That commenter also recommended that we partner with 
reputable non-profit organizations that will provide safe and 
affordable services such as non-profit enrollment assisters. Another 
commenter suggested that we limit which pre-paid debit cards may be 
used in order to limit the transaction fee for both the consumer and 
issuer.
    Response: We will leave it up to each Exchange on whether or not to 
partner with particular payment service companies. FFEs will not 
partner with any payment service companies for the first year. We will 
subsequently evaluate the value of having a relationship with such 
partner.
    Comment: We received some comments suggesting that we maximize the 
range of payment options offered to applicants. Commenters noted that 
issuers should offer electronic funds transfer (EFT) for individuals 
with bank accounts using Automated Clearing House payments including 
direct deposits. Other commenters recommended that applicants be made 
aware of all their payment options by mail and information displayed to 
the applicant on the Web site. In particular, issuers should ensure 
that consumers

[[Page 54127]]

are aware of all alternative payment methods.
    Response: In this final rule, we are including EFT as a payment 
method that issuers must accept. While we believe many individuals with 
bank accounts will select this option, the requirement to accept a 
variety of payment methods, as proposed in the proposed rule and as 
being finalized here, necessitates that issuers inform the consumer of 
all payment options when a consumer needs to make a payment, whether in 
the mail or on the issuer's Web site. We are therefore making explicit 
in this final rule that, when collecting payment, all payment method 
options must be equally presented to the consumer.
    Comment: We received numerous comments on what payment methods QHP 
issuers should be required to accept. Many commenters supported the 
methods provided in the preamble of the proposed rule. Some commenters 
suggested the use of all general-purpose pre-paid debit cards instead 
of just reloadable or replenishable pre-paid debit cards to be more 
inclusive and since it doesn't make a difference operationally. Other 
commenters recommended money transfer platforms, the ability to deduct 
from an enrollee's paycheck, and automatic deductions from credit or 
debit cards. However, other commenters expressed concern on whether all 
issuers would be able to support credit or debit card payments as well 
as ongoing automatic deductions from credit or debit cards. We received 
some comments that issuers should mimic CHIP programs and accept 
multiple methods of payment from multiple locations, most importantly 
accepting cash by establishing payment providers throughout 
communities. Lastly, many commenters were concerned about additional 
administrative and transactional fees depending on which payment 
methods would be required, whether the fees be assessed on the issuer, 
Exchange, or consumer.
    Response: Due to the overwhelming support for pre-paid debit cards, 
we have included all general-purpose pre-paid debit cards as a payment 
method that issuers are required to accept. Because many issuers accept 
debit cards, this requirement should not cause administrative or 
operational issues. At this time, we will allow issuers to decide 
whether or not to accept automatic deductions from credit or debit 
cards. We also think that requiring issuers to accept cash would not be 
operationally possible given the resource and time restraint to 
establish the necessary relationship with payment providers. However, 
we are still requiring issuers to accept other paper payment methods 
described in the preamble of the proposed rule including paper checks, 
money orders, and cashier's checks.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.1240 of the 
proposed rule, with a few modifications. We revised paragraph (a)(2) to 
include the minimum payment methods that issuers must accept. 
Additionally, we clarified that these methods must be accepted for all 
payments. We also clarified that this applies to the individual market 
only. Lastly, we added language to reflect that all payment method 
options must be presented equally for a consumer to select their 
preferred payment method.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 (PRA) requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The following sections of this document contain estimates of burden 
imposed by the associated information collection requirements (ICRs); 
however, not all of these estimates are subject to the ICRs under the 
PRA for the reasons noted. Estimated salaries for the positions cited 
were mainly taken from the Bureau of Labor Statistics (BLS) Web site 
(http://www.bls.gov/oco/ooh_index.htm).
    The estimated salaries for the health policy analyst and the senior 
manager were taken from the Office of Personnel Management Web site. 
Fringe Benefits estimates were taken from the BLS March 2013 Employer 
Costs for Employee Compensation Report.\11\
---------------------------------------------------------------------------

    \11\ BLS March 2013 Employer Costs for Employee Compensation 
Report (March 12, 2013). Available at http://www.bls.gov/news.release/ecec.toc.htm.
---------------------------------------------------------------------------

A. ICRs Related to the Risk Corridors Program (Sec.  153.500)

    In this final rule, we amend the definition of a QHP in Sec.  
153.500 for the purposes of the risk corridors program. We provide that 
a plan will be subject to the risk corridors program if it is (a) A 
QHP, as defined in 45 CFR 155.20; (b) a plan offered outside the 
Exchange that is the same plan as a QHP, as defined in 45 CFR 155.20, 
offered through the Exchange by the same issuer, pursuant to the 
criteria finalized in Part C(1)(a) of this rule; or (c) a plan offered 
outside the Exchange that is substantially the same as a QHP, as 
defined in 45 CFR 155.20, offered through the Exchange by the same 
issuer, pursuant to the criteria finalized in Part B(1)(a) of this 
rule.
    In this final rule, we note that we intend to issue guidance on the 
operational aspects of this standard, including with respect to how HHS 
and issuers will identify plans submissions (including those submitted 
for the 2014 benefit year) that are ``substantially the same'' as a QHP 
offered through an Exchange for the purposes of determining whether the 
plan will participate in the risk corridors program. QHP issuers may be 
required to submit plan identification information to HHS as part of 
HHS's determination of which plans offered outside of the Exchange will 
participate in the risk corridors program. We intend to account for 
this information collection requirement in a PRA package that we will 
publish for public comment and advance for OMB approval in the future. 
Information related to the requirement will not be effective until 
comment is sought and the collection is approved by OMB.

 B. ICRs Related to Ability of States To Permit Agents and Brokers To 
Assist Qualified Individuals, Qualified Employers, or Qualified 
Employees Enrolling in Qualified Health Plans in the Federally-
Facilitated Exchange (Sec.  155.220)

    In Sec.  155.220(c)(3)(i), we amend the provision to require Web-
brokers to display all QHP information provided by the Exchange or 
directly by QHP issuers consistent with the requirements of Sec.  
155.205(b)(1) and Sec.  155.205(c), and to the extent that not all 
information required under Sec.  155.205(b)(1) is displayed on the 
agent or broker's Internet Web site for a QHP,

[[Page 54128]]

prominently display a standardized disclaimer provided by HHS stating 
that information required under Sec.  155.205(b)(1) for the QHP is 
available on the Exchange Web site, and provide a Web link to the 
Exchange Web site. To comply with this requirement, each Web-broker 
will have to program its Web site to display the standardized 
disclaimer language in the event that it cannot display plan 
information required under Sec.  155.205(b)(1) for a particular QHP. 
The Web-broker will also have to include a Web link to the Exchange Web 
site. We estimate that it will take up to 12 hours at an hourly cost of 
$52.50 for a computer programmer to perform the necessary programming, 
and 4 hours at an hourly cost of $79.08 for a senior manager to review 
the Web site display, for a total cost of approximately $950 per Web-
broker. Assuming that approximately 50 Web-brokers elect to access the 
FFE's application programming interface and that each Web-broker will 
have to display the standardized disclaimer language and Web link, we 
estimate that this provision would increase the overall burden estimate 
by approximately $47,300.
    Section 155.220(c)(3)(vii) requires each Web-broker in FFE states 
to display on its Web site a standardized disclaimer provided by HHS 
and a link to the FFE Web site. To comply with this requirement, each 
Web-broker will have to program its Web site to display the 
standardized disclaimer and a Web link to the Exchange Web site. We 
estimate that it will take up to 12 hours at an hourly cost of $52.50 
for a computer programmer to perform the necessary programming, and 4 
hours at an hourly cost of $79.08 for a senior manager to review the 
Web site display, for a total cost of approximately $950 per Web-
broker. At this time, we anticipate that all Web-brokers will be 
participating in FFE states. Assuming that approximately 50 Web-brokers 
elect to access the FFE's application programming interface and that 
each Web-broker will have to display the standardized disclaimer 
language and Web link, we estimate that this provision would increase 
the burden estimate by approximately $47,300.
    Section 155.220(c)(4) requires a Web-broker to comply with several 
standards when the Web-broker permits other agents and brokers to use 
its Web site to enroll a consumer through the FFE, pursuant to a 
contractual or other arrangement between the Web-broker and the other 
agent or broker. One of the standards requires the Web-broker to 
provide to the FFE a list of agents or brokers who enter into such an 
arrangement, if requested by HHS. We understand that Web-brokers who 
work with other agents and brokers typically obtain and manage 
information on each of its agents or brokers as part of an agent 
onboarding process. As a result, Web-brokers already have the necessary 
data to list each of their agents or brokers that it contracts with 
under such arrangements. We estimate that it will take up to 48 hours 
at an hourly cost of $52.50 for a computer programmer to perform the 
necessary programming, and 4 hours at an hourly cost of $79.08 for a 
senior manager to develop a listing of affiliated third-party agents 
and brokers, $3,150 per Web-broker. Assuming that approximately 50 Web-
brokers elect to access the FFE's application programming interface and 
that each has allows third-party agents to access their Web sites, we 
estimate that this provision would increase the burden estimate by 
approximately $157,600. Section 155.220(g) authorizes HHS to terminate 
an agent's or broker's agreement with an FFE if HHS determines that the 
agent or broker is out of compliance with the standards outlined in 45 
CFR 155.220. Section 155.220(h) sets forth the process whereby an agent 
or broker can request reconsideration of HHS's termination. 
Specifically, the agent or broker must submit the request for 
reconsideration within 30 calendar days of receipt of the date of the 
notice of termination. Because we are finalizing this provision as 
proposed, and did not receive comments on our estimates, we continue to 
use our estimates from the proposed rule.

C. ICRs Related to the Eligibility Process (Sec.  155.310)

    Section 155.310(k) provides that if an Exchange does not have 
enough information to conduct an eligibility determination for advance 
payments of the premium tax credit or cost-sharing reductions, the 
Exchange must provide notice to the applicant regarding the incomplete 
application. We anticipate that this notice requirement is not a 
separate notice to an individual but text within the eligibility 
determination notice described in Sec.  155.310(g) and discussed in a 
separate information collection request that is associated with the 
notice of proposed rulemaking (January 22, 2013 (78 FR 4594)). We 
therefore do not include a separate burden estimate to develop this 
notice but the time and cost associated with this notice is included 
within the estimate in Sec.  155.310(g).
    Section 155.310(k)(2) provides that the Exchange must provide the 
applicant with a period of no less than 10 days and no more than 90 
days from the date on which the notice is sent to the applicant to 
provide the information needed to complete the application to the 
Exchange. Because we are finalizing these provisions with only a minor 
modification to the lower limit of time that the Exchange must provide 
to the applicant to complete an application, and did not receive 
comments on our estimates, we continue to use our estimates from the 
proposed rule. For a detailed explanation of burden hour and cost 
please refer to the associated supporting statement at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS%E2%80%9310490.html.
Part 155--Exchange Establishment Standards and Other Related Standards 
Under the Affordable Care Act
    It is important to note that these regulations involve several 
information collections that will occur through the single, streamlined 
application for enrollment in a QHP and for insurance affordability 
programs described in 45 CFR 155.405. We have accounted for the burden 
associated with these collections in the Supporting Statement for Data 
Collection to Support Eligibility Determinations for Insurance 
Affordability Programs and Enrollment through Health Benefits 
Exchanges, Medicaid, and Children's Health Insurance Program Agencies 
(OMB control number 0938-1191/CMS-10440).

D. ICRs Regarding Appeals (Sec. Sec.  155.505, 155.510, 155.520, 
155.530, 155.535, 155.540, 155.545, 155.550, 155.555, 155.740)

    The eligibility appeals provisions in subparts F and H include 
requirements for the collection of information that will support 
processing and adjudicating appeals for individuals, employers facing 
potential tax liability, and SHOP employers and employees. The 
information collection will be largely the same for each type of appeal 
and includes the appeal request, expedited appeal request, appeal 
withdrawal, request to vacate, request for additional information, 
special considerations form, and appointment and removal of authorized 
representative. Because we are finalizing these provisions as proposed, 
and did not receive comments on our estimates, we continue to use our 
estimates from the proposed rule. For a detailed explanation of burden 
hour and cost please refer to the associated supporting statement at 
http://

[[Page 54129]]

www.cms.gov/Regulations-and-Guidance/Legislation/
PaperworkReductionActof1995/PRA-Listing-Items/CMS%E2%80%9310490.html.

E. ICRs Regarding Consumer Cases Related to Qualified Health Plans and 
Qualified Health Plan Issuers (Sec.  156.1010)

    In subpart K of part 156, we describe the information collection 
requirements that pertain to the resolution of consumer cases related 
to QHPs and QHP issuers. Section 156.1010(g)(1) states that QHP issuers 
must include the date of case resolution, Sec.  156.1010(g)(2) states 
that QHP issuers must record a clear and concise narrative documenting 
the resolution of a consumer case in the HHS-developed casework 
tracking system, and Sec.  156.1010(g)(3) states that QHP issuers must 
provide information about compliance issues found by a State during the 
investigation of a case. The additional information required by Sec.  
156.1010(g)(1) and Sec.  156.1010(g)(3) are clarifications of the 
original proposed requirements and do not represent an additional 
burden. Because we are finalizing these provisions as proposed, and did 
not receive comments on our estimates, we continue to use our estimates 
from the proposed rule.
    For a detailed explanation of burden hour and cost please refer to 
the associated supporting statement at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS%E2%80%9310490.html.

F. ICRs Related to Enrollment Process for Qualified Individuals (Sec.  
156.1230)

    Section Sec.  156.1230(a)(1)(ii), issuers would be required provide 
information on available QHPs when they choose to use their Web site to 
directly enroll qualified individuals into QHPs in a manner considered 
to be through the Exchange. The QHP information required to be posted 
on the Web site would include premium and cost-sharing information, the 
summary of benefits and coverage, levels of coverage (``metal levels'') 
for each QHP, results of the enrollee satisfaction survey, quality 
ratings, medical loss ratio information, transparency of coverage 
measures, and a provider directory. Section Sec.  156.1230(a)(1)(i) 
requires an issuer to direct an individual to complete an application 
with the Exchange and receive eligibility determinations from the 
Exchange to allow for an accurate plan selection process. Additionally, 
section Sec.  156.1230(a)(1)(iv) would require the issuer Web site to 
inform applicants about the availability of other QHP products 
available through an Exchange and to display a Web site link to the 
appropriate Exchange Web site. An issuer would also submit enrollment 
information back to the Exchange including the APTC amount and 
attestation from an individual as required by Sec.  156.1230(a)(1)(v).
    Section 156.1230(a)(2) would allow qualified individuals to apply 
for an eligibility determination or redetermination for coverage 
through the Exchange and insurance affordability programs with the 
assistance of an issuer application assister if the issuer ensures its 
application assisters' compliance with requirements, including training 
and privacy and security standards.
    We are finalizing these provisions with a few modifications. Since 
we are no longer requiring an additional requirement for the issuer 
agreement, the burden associated with amending the agreement between 
the issuer and the Exchange if the Exchange implements this provision 
is no longer applicable. The burden associated with the rest of these 
provisions remains the same as the proposed rule. For a detailed 
explanation of burden hour and cost please refer to the associated 
supporting statement at http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS%E2%80%9310490.html. We clarified that the burden in Sec.  
156.1230(a)(1) took into account an issuer needing to distinguish 
between QHPs for which a consumer is eligible and other non-QHPs that 
an issuer may offer as required by Sec.  156.1230(a)(1)(iii).
    We have submitted an information collection request to OMB for 
review and approval of the ICRs contained in this final rule. The 
requirements are not effective until approved by OMB and assigned a 
valid OMB control number.
    If you comment on these information collection and recordkeeping 
requirements, please do the following:
    Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-9957-F], Fax: (202) 395-6974; or Email: [email protected].

IV. Regulatory Impact Analysis

    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by OMB.

A. Summary

    This final rule outlines Exchange standards with respect to 
eligibility appeals, agents and brokers, direct enrollment, the 
handling of consumer cases, imposing CMPs in FFEs; and decertification 
of a QHP offered by an issuer through a FFE. It also sets forth 
standards with respect to a State's operation of an Exchange and SHOP.
    HHS has crafted this final rule to implement the protections 
intended by Congress in an economically efficient manner. We have 
examined the effects of this final rule as required by Executive Order 
12866 (58 FR 51735, September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), 
Executive Order 13132 on Federalism, and the Congressional Review Act 
(5 U.S.C. 804(2)). In accordance with OMB Circular A-4, HHS has 
quantified the benefits and costs where possible, and has also provided 
a qualitative discussion of some of the benefits and costs that may 
stem from this final rule.

B. Executive Orders 13563 and 12866

    Executive Order 12866 (58 FR 51735) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, and safety effects; distributive impacts; and equity). 
Executive Order 13563 (76 FR 3821, January 21, 2011) is supplemental to 
and reaffirms the principles, structures, and definitions governing 
regulatory review as established in Executive Order 12866.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a final 
rule--(1) Having an annual effect on the economy of $100 million or 
more in any one year, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with

[[Page 54130]]

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 final rule is not likely to have 
economic impacts of $100 million or more in any one year, and therefore 
does not meet the definition of ``economically significant rule'' under 
Executive Order 12866. HHS has, however, provided an assessment of the 
potential costs and benefits associated with this final regulation.
1. Need for Regulatory Action
    Starting in 2014, qualified individuals and qualified employers 
will be able to use coverage provided by QHPs--private health insurance 
that has been certified as meeting certain standards--through 
Exchanges. This final rule sets forth standards related to eligibility, 
including standards for eligibility appeals, verification of 
eligibility for minimum essential coverage, and treatment of incomplete 
applications. It also establishes consumer protections regarding 
privacy and security, clarifies the role of agents, brokers, and issuer 
application assisters; consumer cases; methods of premium payment; 
enforcement actions such as CMPs and decertification of a QHP in a FFE. 
Finally, it sets forth provisions regarding a State's operation of a 
SHOP.
2. Summary of Impacts
    In accordance with OMB Circular A-4, Table IV.1 below depicts an 
accounting statement summarizing HHS's assessment of the benefits and 
costs associated with this regulatory action. The period covered by the 
RIA is 2014--2017.
    HHS anticipates that the provisions of this final rule will ensure 
smooth operation of Exchanges and provide consumer protections. The 
eligibility appeals process and the notice standards included in this 
final rule will support the development and implementation of a 
streamlined eligibility process, and in doing so, will increase 
enrollment in health insurance. Affected entities such as States, QHP 
issuers, agents, and brokers will incur costs to submit reports to HHS 
and Exchanges, to comply with privacy and security standards for PII, 
and to comply with enforcement actions. In accordance with Executive 
Order 12866, HHS believes that the benefits of this regulatory action 
justify the costs.

                                          Table IV.1: Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
    * Ensure smooth functioning of State Exchanges and FFEs.....................................................
    * Increased access to fair and unbiased customer assistance and information about coverage options for
     consumers, enabling consumers to make informed decisions.
    * Ensure privacy and data security protections..............................................................
    * Improve access to health insurance, by ensuring accurate and fair appeals of eligibility determinations...
    * Improve program performance, reduce non-compliance by QHPs and agents and brokers, and decrease the
     likelihood of errors and adverse outcomes for consumers.
----------------------------------------------------------------------------------------------------------------
             Costs                      Estimate                Year          Discount Rate          Period
----------------------------------------------------------------------------------------------------------------
Annualized.....................  $17.64 million........               2013                  7          2014-2017
Monetized ($/year).............  $17.64 million........               2013                  3          2014-2017
----------------------------------------------------------------------------------------------------------------
Annual costs related to eligibility appeals; enrollment process for Qualified Individuals; documentation of
 resolution of consumer cases; costs to agents and brokers and QHPs related to enforcement actions.\1\.
----------------------------------------------------------------------------------------------------------------
Qualitative:
    * Costs to Exchanges and non-Exchange entities subject to FFE privacy and data security standards to comply
     with privacy and data security standards.
    * Possible reduction in costs for SHOPs due to elimination of the requirement to accept paper applications
     and applications by telephone.
    * Cost incurred by SHOPs to develop uniform standards for the termination of a group's coverage in a QHP and
     to keep sufficient records of terminations and reasonable accommodations.
    * Eligibility appeals process may reduce administrative costs, by providing resolution options that enable
     the vast majority of issues to be resolved by lower-level staff.
----------------------------------------------------------------------------------------------------------------
Note: 1. The bases for these costs are discussed in the Paperwork Reduction Act sections of the proposed rules
  associated with this final rule.

3. Anticipated Benefits and Costs
    Starting in 2014, qualified individuals and qualified employers 
will be able to use health coverage obtained through Exchanges. The 
Congressional Budget Office estimated that the number of people 
enrolled in coverage through Exchanges will increase from 7 million in 
2014 to 24 million in 2017.\12\ Exchanges will create competitive 
marketplaces where qualified individuals and qualified employers can 
shop for insurance coverage, and are expected to reduce the unit price 
of quality insurance for the average consumer by pooling risk and 
promoting competition.
---------------------------------------------------------------------------

    \12\ ``Effects on Health Insurance and the Federal Budget for 
the Insurance Coverage Provisions in the Affordable Care Act--May 
2013 Baseline,'' Congressional Budget Office, May 14, 2013.
---------------------------------------------------------------------------

    The final rule specifies the standards and processes for the 
oversight and accountability of entities responsible for certain 
operations of the Exchanges. Affected entities include States, in their 
roles of establishing and operating Exchanges and SHOPs; FFEs and FF-
SHOPs; issuers of QHPs; Exchange appeals entities; and insurance agents 
and brokers.
a. Benefits
    This final rule implements provisions that will ensure smooth 
functioning of State Exchanges and FFEs, improve access to health 
insurance and customer service, and establish consumer protection 
measures.
    The final rule provides that, for individual eligibility 
determinations, applicants and enrollees may appeal eligibility 
determinations made through the eligibility process at the State level, 
if the State opts to establish an appeals process, or at the Federal 
level, if the State opts not to establish an appeals process or upon 
exhaustion of a State

[[Page 54131]]

based appeals process. An effective eligibility appeals process 
improves access to health insurance, by providing recourse for issues 
that arise in the eligibility process that can disrupt coverage. The 
appeals process is based on best practices to provide flexible, 
transparent, and consumer-centric appeals review and resolution. By 
providing an efficient, but comprehensive appeals process, the 
provisions of this final rule will ensure accurate and fair appeals of 
eligibility determinations. In addition, by providing a separate 
appeals process for small businesses, the provisions of this final rule 
will help ensure that accurate and satisfactory determinations are made 
for small businesses.
    The final rule also allows a State to operate only a State-based 
SHOP while the individual market Exchange is operated as an FFE. This 
will enable the State to focus on effective implementation of the SHOP. 
Each SHOP is also required to develop uniform standards for the 
termination of coverage in a QHP, starting in 2015, unless the SHOP 
offers employers the opportunity to give their employees a choice of 
plans at one actuarial value level (``employee choice'') before then. 
Standardizing the timing, form, and manner of a group's termination in 
the SHOP ensures that an employer offering coverage through multiple 
health insurance issuers (under the SHOP ``employee choice'' model) 
will be subject to uniform, predictable termination policies.
    The final rule implements consumer protections designed to ensure 
privacy and security of PII, increased access to customer assistance, 
greater information about coverage options, and more informed coverage 
decisions by consumers. Permitting issuer application assisters to 
assist individuals with applying for eligibility determinations or 
redeterminations for coverage through the Exchange will increase 
assistance available to consumers, while the training and compliance 
standards will ensure that such assistance is fair and unbiased. The 
final rule establishes requirements for issuer application assisters 
and agents and brokers who assist consumers, requiring them to comply 
with registration and training requirements. The final rule also 
establishes standards under which HHS can terminate its relationship 
with agents and brokers in the FFE, to help ensure that agents and 
brokers continue to meet Exchange standards. The final rule also amends 
and establishes additional standards for Web-brokers. In addition, the 
requirement for QHP issuers conducting direct enrollment, in a manner 
considered to be through an Exchange, to provide standardized 
comparative information on their Web sites ensures that consumers can 
readily differentiate and compare plan choices leading to informed 
decisions. Consumers without bank accounts will also have a variety of 
payment options.
    Oversight and enforcement actions such as CMPs and decertification 
of a QHP, termination of an agent and broker agreement for 
participation in the individual market of an FFE, will improve program 
performance, reduce non-compliance by QHPs and agents and brokers, and 
decrease the likelihood of errors and adverse outcomes for consumers.
b. Costs
    Affected entities will incur costs to comply with the provisions of 
this final rule. Costs related to information collection requirements 
subject to PRA are discussed in detail in section III and include 
administrative costs incurred by States, issuers and agents and brokers 
related to notice and reporting requirements; enforcement actions; 
enrollment process for qualified individuals; and training 
requirements. In this section we discuss other costs related to the 
provisions in this final rule.
    A State that establishes an eligibility appeals process, an 
employer appeals process, or a SHOP eligibility appeals process will 
incur related administrative costs. However, HHS will provide such 
processes if States fail to do so. In addition, an effective 
eligibility process will reduce administrative costs, by providing 
resolution options that enable the vast majority of issues to be 
resolved by lower-level staff.
    Exchanges and agents and brokers permitted by States to assist 
consumers will incur costs to comply with additional standards for 
display of QHPs when using their Web sites as Web-brokers to assist 
consumers select a QHP, comply with the Exchange's privacy and security 
standards as required in an agreement with HHS, and to submit a request 
for reconsideration if HHS terminates its agreement with the agent or 
broker. Issuers will also incur expenses to provide privacy and 
security training to their customer service representatives. It is 
anticipated that Exchanges and issuers' IT systems will need minimal 
changes to comply with these provisions, particularly because they must 
already comply with similar standards regarding protected health 
information.
    The final rule also amends existing requirements so that SHOPs are 
no longer be required to accept paper applications and applications by 
telephone. This may reduce the cost of operating a SHOP. A SHOP will 
also incur costs to develop uniform standards for the termination of a 
group's coverage in a QHP and to keep sufficient records of 
terminations and reasonable accommodations.

C. Regulatory Alternatives

    Under the Executive Order, HHS is required to consider alternatives 
to issuing rules and alternative regulatory approaches.
    One alternative considered was to establish only a Federal 
eligibility appeals process and not to offer State Exchanges the option 
to establish their own appeals processes. This alternative, however, 
was not selected because it would limit State flexibility and negate 
the administrative efficiencies available through the use of existing 
appeals processes. HHS believes that the option adopted for this final 
rule strikes the best balance of ensuring efficient operation and 
integrity of Exchanges while providing flexibility to the States and 
minimizing the burden on States.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies that issue a 
rule to analyze options for regulatory relief of small businesses if a 
rule has a significant impact on a substantial number of small 
entities. The RFA generally defines a ``small entity'' as--(1) A 
proprietary firm meeting the size standards of the Small Business 
Administration (SBA), (2) a nonprofit organization that is not dominant 
in its field, or (3) a small government jurisdiction with a population 
of less than 50,000 (States and individuals are not included in the 
definition of ``small entity''). HHS uses as its measure of significant 
economic impact on a substantial number of small entities a change in 
revenues of more than 3 percent to 5 percent. HHS anticipates that the 
final rule would not have a significant economic impact on a 
substantial number of small entities.
    As discussed in the Web Portal final rule published on May 5, 2010 
(75 FR 24481), HHS examined the health insurance industry in depth in 
the RIA we prepared for the final 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

[[Page 54132]]

size thresholds for ``small'' business established by the SBA 
(currently $7 million in annual receipts for health issuers).\13\ In 
addition, HHS used the data from Medical Loss Ratio (MLR) annual report 
submissions for the 2011 MLR reporting year to develop an estimate of 
the number of small entities that offer comprehensive major medical 
coverage. These estimates may overstate the actual number of small 
health insurance issuers that would be affected, since they do not 
include receipts from these companies' other lines of business. It is 
estimated that out of 466 issuers nationwide, there are 22 small 
entities each with less than $7 million in earned premiums that offer 
individual or group health insurance coverage and would therefore be 
subject to the requirements of this final regulation. Thirty six 
percent of these small issuers belong to larger holding groups, and 
many if not all of these small issuers are likely to have other lines 
of business that would result in their revenues exceeding $7 million. 
It is uncertain how many of these 466 issuers will offer QHPs and be 
subject to the provisions of this final rule. Based on this analysis, 
however, HHS expects that this final rule will not affect small 
issuers.
---------------------------------------------------------------------------

    \13\ ``Table of Size Standards Matched To North American 
Industry Classification System Codes,'' effective January 7, 2013, 
U.S. Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------

    Some of the agents and brokers affected by the provisions of this 
final rule may be small entities and will incur costs to comply with 
the provisions of this final rule. The size threshold for ``small'' 
business established by the SBA is currently $7 million in annual 
receipts for insurance agencies and brokerages. We anticipate that 
agents and brokers will continue to be an important source of 
assistance for many consumers seeking access to health insurance 
coverage through an Exchange, including those who own and/or are 
employed by small businesses. Due to lack of data, HHS is unable to 
estimate how many agents and brokers permitted by States to assist 
consumers would be small entities.
    This final rule establishes an appeals process through which an 
employer may appeal a determination that the employer does not provide 
qualifying coverage in an eligible employer-sponsored plan with respect 
to the employee referenced in the notice pursuant to section 1411(f)(2) 
of the Affordable Care Act, or an eligibility determination for SHOP. 
This rule establishes standards for employers that choose to 
participate in a SHOP. The SHOP is limited by statute to employers with 
at least one but not more than 100 employees. For this reason, we 
expect that many employers eligible to participate in the SHOP would 
meet the SBA standard for small entities. However, since participation 
in the SHOP is voluntary, this final rule does not place any 
requirements on small employers.

E. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 
requires that agencies assess anticipated costs and benefits before 
issuing any final rule that includes a Federal mandate that could 
result in expenditure in any one year by State, local or tribal 
governments, in the aggregate, or by the private sector, of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
threshold level is approximately $141 million.
    UMRA does not address the total cost of a final rule. Rather, it 
focuses on certain categories of cost, mainly those ``Federal mandate'' 
costs resulting from--(1) imposing enforceable duties on State, local, 
or tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, State, 
local, or tribal governments under entitlement programs.
    The final rule directs States to undertake activities for State 
Exchanges. There are no mandates on local or tribal governments. The 
private sector, for example, QHP issuers and agents and brokers, will 
incur costs to comply with the requirements set forth in this final 
rule. The related costs are estimated to be approximately $17.5 million 
in 2014. However, consistent with policy embodied in UMRA, this final 
rule has been designed to be a low-burden alternative for State, local 
and tribal governments, and the private sector while achieving the 
objectives of the Affordable Care Act.

F. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications.
    States are the primary regulators of health insurance coverage. 
States will continue to apply State laws regarding health insurance 
coverage. If any State law or requirement prevents the application of a 
Federal standard, then that particular State law or requirement would 
be preempted. State requirements that are more stringent than the 
Federal requirements would be not be preempted by this final rule. 
Accordingly, States have significant latitude to impose requirements 
with respect to health insurance coverage that are more restrictive 
than the Federal law.
    States will continue to license, monitor and regulate all agents 
and brokers, both inside and outside of Exchanges. All State laws 
related to agents and brokers, including State laws related to 
appointments, contractual relationships with issuers, and licensing and 
marketing requirements, will continue to apply. Under the final rule, 
States have the option to establish and operate only a State-based SHOP 
while the individual market Exchange is operated as an FFE. The final 
rule also provides additional flexibility to States with respect to the 
operation of a SHOP-specific Navigator program when the State 
establishes and operates only a SHOP Exchange. HHS would coordinate 
enforcement actions for QHP issuers with State efforts in order to 
streamline the oversight of QHP issuers by States and to avoid 
inappropriate duplication of enforcement actions. Because QHPs are one 
of several commercial market insurance products operating in State 
markets, HHS would not seek to inappropriately duplicate or interfere 
with the traditional regulatory roles played by the State departments 
of insurance. HHS would generally confine its QHP oversight to 
Exchange-specific requirements and attributes. HHS would also seek to 
work collaboratively with State DOIs on topics of mutual concern, in 
the interest of efficiently deploying oversight resources and avoiding 
needlessly duplicative regulatory roles. HHS may consider the 
regulatory action taken by a State against a QHP issuer as a factor in 
determining whether to decertify a QHP. HHS recognizes that States play 
an important role in handling consumer cases related to health 
insurance and HHS anticipates that States will continue to assist 
consumers with these grievances and complaints. QHP issuers are 
expected to comply with standards established by State law and 
regulation for cases forwarded to an issuer by a State in which it 
offers QHPs. States may opt to establish an eligibility appeals process 
and an employer appeals process or HHS will provide such a process if a 
State fails to do so.
    The requirements specified in this final rule will impose direct 
costs on State and local governments and HHS has made every effort to 
minimize those costs. In compliance with the requirement of Executive 
Order 13132

[[Page 54133]]

that agencies examine closely any policies that may have Federalism 
implications or limit the policymaking discretion of the States, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States. Throughout the process of developing this final rule, 
HHS has attempted to balance the States' interests in regulating health 
insurance issuers, and Congressional intent to provide uniform 
protections to consumers in every State. By doing so, it is HHS's view 
that it has complied with the requirements of Executive Order 13132. 
Under the requirements set forth in section 8(a) of Executive Order 
13132, and by the signatures affixed to this rule, HHS certifies that 
the CMS Center for Consumer Information and Insurance Oversight has 
complied with the requirements of Executive Order 13132 for the 
attached final rule in a meaningful and timely manner.

G. Congressional Review Act

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

List of Subjects

45 CFR Part 147

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

45 CFR Part 153

    Administrative practice and procedure, Adverse selection, Health 
care, Health insurance, Health records, Organization and functions 
(Government agencies), Premium stabilization, Reporting and 
recordkeeping requirements, Reinsurance, Risk adjustment, Risk 
corridors, Risk mitigation, State and local governments.

45 CFR Part 155

    Administrative practice and procedure, Health care access, Health 
insurance, Reporting and recordkeeping requirements, State and local 
governments, Cost-sharing reductions, Advance payments of premium tax 
credit, Administration and calculation of advance payments of the 
premium tax credit, Plan variations, Actuarial value.

45 CFR Part 156

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

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 147, 153, 155, and 156 as set 
forth below:

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

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

    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
2. Section 147.102 is amended by revising paragraph (a) introductory 
text and adding two sentences at the end of paragraph (a)(1)(ii) to 
read as follows:


Sec.  147.102  Fair health insurance premiums.

    (a) In general. With respect to the premium rate charged by a 
health insurance issuer in accordance with Sec.  156.80 of this 
subchapter for health insurance coverage offered in the individual or 
small group market--
    (1) * * *
    (ii) * * * For purposes of this paragraph, rating area is 
determined in the small group market using the group policyholder's 
principal business address and in the individual market using the 
primary policyholder's address. For plans (other than qualified health 
plans offered through the Federally-facilitated Small Business Health 
Options Program) for which an issuer can demonstrate that it relied in 
good faith on guidance from an applicable State authority issued before 
August 28, 2013, that differs from this paragraph (a)(1)(ii), the 
preceding sentence will not apply until the first plan year beginning 
on or after January 1, 2015 with respect to coverage in the small group 
market.
* * * * *

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

0
3. Authority citation for part 153 is revised to read as follows:

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


Sec.  153.20  [Amended]

0
4. Section 153.20 is amended by removing the definition of ``Qualified 
health plan or QHP''.

0
5. Section 153.500 is amended by adding a definition of ``Qualified 
health plan or QHP'' to read as follows:


Sec.  153.500  Definitions.

* * * * *
    Qualified health plan or QHP means, with respect to the risk 
corridors program only --
    (1) A qualified health plan, as defined at Sec.  155.20 of this 
subchapter;
    (2) A health plan offered outside the Exchange by an issuer that is 
the same plan as a qualified health plan, as defined at Sec.  155.20 of 
this subchapter, offered through the Exchange by the issuer. To be the 
same plan as a qualified health plan (as defined at Sec.  155.20 of 
this subchapter) means that the health plan offered outside the 
Exchange has identical benefits, premium, cost-sharing structure, 
provider network, and service area as the qualified health plan (as 
defined at Sec.  155.20 of this subchapter); or
    (3) A health plan offered outside the Exchange that is 
substantially the same as a qualified health plan, as defined at Sec.  
155.20 of this subchapter, offered through the Exchange by the issuer. 
To be substantially the same as a qualified health plan (as defined at 
Sec.  155.20 of this subchapter) means that the health plan meets the 
criteria set forth in paragraph (2) of this definition with respect to 
the qualified health plan, except that its benefits, premium, cost-
sharing structure, and provider network may differ from those of the 
qualified health plan (as defined at Sec.  155.20 of this subchapter) 
provided that such differences are tied directly and exclusively to 
Federal or State requirements or prohibitions on the coverage of 
benefits that apply differently to plans depending on whether they are 
offered through or outside an Exchange.
* * * * *

[[Page 54134]]

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

0
6. Authority citation for part 155 continues to read as follows:

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


0
7. Section 155.20 is amended by revising the definition for 
``Exchange'' and by adding a definition for ``Issuer application 
assister'' to read as follows:


Sec.  155.20  Definitions.

* * * * *
    Exchange means a governmental agency or non-profit entity that 
meets the applicable standards of this part and makes QHPs available to 
qualified individuals and/or qualified employers. Unless otherwise 
identified, this term includes an Exchange serving the individual 
market for qualified individuals and a SHOP serving the small group 
market for qualified employers, regardless of whether the Exchange is 
established and operated by a State (including a regional Exchange or 
subsidiary Exchange) or by HHS.
* * * * *
    Issuer application assister means an employee, contractor, or agent 
of a QHP issuer who is not licensed as an agent, broker, or producer 
under State law and who assists individuals in the individual market 
with applying for a determination or redetermination of eligibility for 
coverage through the Exchange or for insurance affordability programs.
* * * * *

0
8. Section 155.100 is amended by revising paragraph (a), by 
redesignating paragraph (b) as paragraph (c) and by adding a new 
paragraph (b) to read as follows:


Sec.  155.100  Establishment of a State Exchange.

    (a) General requirements. Each State may elect to establish:
    (1) An Exchange that facilitates the purchase of health insurance 
coverage in QHPs in the individual market and that provides for the 
establishment of a SHOP; or
    (2) An Exchange that provides only for the establishment of a SHOP.
    (b) Timing. For plan years beginning before January 1, 2015, only 
States that provide reasonable assurances to CMS that they will be in a 
position to establish and operate only a SHOP for 2014 may elect to 
establish an Exchange that provides only for the establishment of a 
SHOP, pursuant to the process in Sec.  155.105(c), (d), and/or (e), 
whichever is applicable. For plan years beginning on or after January 
1, 2015, any State may elect to establish an Exchange that provides 
only for the establishment of a SHOP, pursuant to the process in Sec.  
155.106(a).
* * * * *

0
9. Section 155.105 is amended by revising paragraphs (b)(1) and (2) and 
(f) to read as follows:


Sec.  155.105  Approval of a State Exchange.

* * * * *
    (b) * * *
    (1) The Exchange is able to carry out the required functions of an 
Exchange consistent with subparts C, D, E, F, G, H, and K of this part 
unless the State is approved to operate only a SHOP by HHS pursuant to 
Sec.  155.100(a)(2), in which case the Exchange must perform the 
minimum functions described in subpart H and all applicable provisions 
of other subparts referenced therein;
    (2) The Exchange is capable of carrying out the information 
reporting requirements in accordance with section 36B of the Code, 
unless the State is approved to operate only a SHOP by HHS pursuant to 
Sec.  155.100(a)(2); and
* * * * *
    (f) HHS operation of an Exchange. (1) If a State does not elect to 
operate an Exchange under Sec.  155.100(a)(1) or an electing State does 
not have an approved or conditionally approved Exchange pursuant to 
Sec.  155.100(a)(1) by January 1, 2013, HHS must (directly or through 
agreement with a not-for-profit entity) establish and operate such 
Exchange within the State. In this case, the requirements in Sec.  
155.120(c), Sec.  155.130 and subparts C, D, E, F, G, H, and K of this 
part will apply.
    (2) If an electing State has an approved or conditionally approved 
Exchange pursuant to Sec.  155.100(a)(2) by January 1, 2013, HHS must 
(directly or through agreement with a not-for-profit entity) establish 
and operate an Exchange that facilitates the purchase of health 
insurance coverage in QHPs in the individual market and operate such 
Exchange within the State. In this case, the requirements in Sec.  
155.120(c), Sec.  155.130 and subparts C, D, E, F, G, and K of this 
part will apply to the Exchange operated by HHS.

0
10. Section 155.140 is amended by revising paragraph (c)(2)(ii) to read 
as follows:


Sec.  155.140  Establishment of a regional Exchange or subsidiary 
Exchange.

* * * * *
    (c) * * *
    (2) * * *
    (ii) Encompass the same geographic area for its regional or 
subsidiary SHOP and its regional or subsidiary Exchange except:
    (A) In the case of a regional Exchange established pursuant to 
Sec.  155.100(a)(2), the regional SHOP must encompass a geographic area 
that matches the combined geographic areas of the individual market 
Exchanges established to serve the same set of States establishing the 
regional SHOP; and
    (B) In the case of a subsidiary Exchange established pursuant to 
Sec.  155.100(a)(2), the combined geographic area of all subsidiary 
SHOPs established in the State must encompass the geographic area of 
the individual market Exchange established to serve the State.

0
11. Section 155.200 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. The Exchange must perform the minimum 
functions described in this subpart and in subparts D, E, F, G, H, and 
K of this part unless the State is approved to operate only a SHOP by 
HHS pursuant to Sec.  155.100(a)(2), in which case the Exchange 
operated by the State must perform the minimum functions described in 
subpart H and all applicable provisions of other subparts referenced 
therein while the Exchange operated by HHS must perform the minimum 
functions described in this subpart and in subparts D, E, F, G, and K 
of this part.
* * * * *

0
12. Section 155.220 is amended by:
0
a. Revising paragraph (c)(3)(i);
0
b. Removing the word ``and'' from the end of paragraph (c)(3)(v) and 
removing the period at the end of paragraph (c)(3)(vi) and adding ``; 
and'' in its place;
0
c. Adding paragraphs (c)(3)(vii) and (c)(4);
0
d. Revising paragraph (d)(3); and
0
e. Adding paragraphs (f), (g), and (h).
    The revisions and additions read as follows:


Sec.  155.220  Ability of States to permit agents and brokers to assist 
qualified individuals, qualified employers, or qualified employees 
enrolling in QHPs.

* * * * *
    (c) * * *
    (3) * * *
    (i) Disclose and display all QHP information provided by the 
Exchange

[[Page 54135]]

or directly by QHP issuers consistent with the requirements of Sec.  
155.205(b)(1) and Sec.  155.205(c), and to the extent that not all 
information required under Sec.  155.205(b)(1) is displayed on the 
agent or broker's Internet Web site for a QHP, prominently display a 
standardized disclaimer provided by HHS stating that information 
required under Sec.  155.205(b)(1) for the QHP is available on the 
Exchange Web site, and provide a Web link to the Exchange Web site;
* * * * *
    (vii) For the Federally-facilitated Exchange, prominently display a 
standardized disclaimer provided by HHS, and provide a Web link to the 
Exchange Web site.
    (4) When an agent or broker, through a contract or other 
arrangement, uses the Internet Web site of another agent or broker to 
help an applicant or enrollee complete a QHP selection in the 
Federally-facilitated Exchange, and the agent or broker accessing the 
Web site pursuant to the arrangement is listed as the agent of record 
on the enrollment:
    (i) The agent or broker who makes the Web site available must:
    (A) Provide HHS with a list of agents and brokers who enter into 
such an arrangement to the Federally-facilitated Exchange, if requested 
by HHS;
    (B) Verify that any agent or broker accessing or using the Web site 
pursuant to the arrangement is licensed in the State in which the 
consumer is selecting the QHP; and has completed training and 
registration and has signed all required agreements with the Federally-
facilitated Exchange pursuant to paragraph (d) of this section and 
Sec.  155.260(b);
    (C) Ensure that its name and any identifier required by HHS 
prominently appears on the Internet Web site and on written materials 
containing QHP information that can be printed from the Web site, even 
if the agent or broker that is accessing the Internet Web site is able 
to customize the appearance of the Web site;
    (D) Terminate the agent or broker's access to its Web site if HHS 
determines that the agent or broker is in violation of the provisions 
of this section and/or HHS terminates any required agreement with the 
agent or broker;
    (E) Report to HHS and applicable State departments of insurance any 
potential material breach of the standards in paragraphs (c) and (d) of 
this section, or the agreement entered into pursuant to Sec.  
155.260(b), by the agent or broker accessing the Internet Web site, 
should it become aware of any such potential breach.
    (ii) HHS retains the right to temporarily suspend the ability of 
the agent or broker making its Web site available to transact 
information with HHS, if HHS discovers a security and privacy incident 
or breach, for the period in which HHS begins to conduct an 
investigation and until the incident or breach is remedied to HHS' 
satisfaction.
* * * * *
    (f) Termination notice to HHS. (1) An agent or broker may terminate 
its agreement with HHS by sending to HHS a written notice at least 30 
days in advance of the date of intended termination.
    (2) The notice must include the intended date of termination, but 
if it does not specify a date of termination, or the date provided is 
not acceptable to HHS, HHS may set a different termination date that 
will be no less than 30 days from the date on the agent's or broker's 
notice of termination.
    (3) Prior to the date of termination, an agent or broker should--
    (i) Notify applicants, qualified individuals, or enrollees that the 
agent or broker is assisting, of the agent's or broker's intended date 
of termination;
    (ii) Continue to assist such individuals with Exchange-related 
eligibility and enrollment services up until the date of termination; 
and
    (iii) Provide such individuals with information about alternatives 
available for obtaining additional assistance, including but not 
limited to the Federally-facilitated Exchange Web site.
    (4) When termination becomes effective under paragraph this 
paragraph (f) or paragraph (g) of this section, the agent or broker 
will not be able to assist any individual through the Federally-
facilitated Exchange, and the agent's or broker's agreement with the 
Exchange pursuant to Sec.  155.260(b) will also be terminated through 
the termination without cause process set forth in that agreement. The 
agent or broker must continue to protect any personally identifiable 
information accessed during the term of either of these agreements with 
the Federally-facilitated Exchange.
    (g) Standards for termination for cause from the Federally-
facilitated Exchange. (1) If, in HHS's determination, a specific 
finding of noncompliance or pattern of noncompliance is sufficiently 
severe, HHS may terminate an agent's or broker's agreement with the 
Federally-facilitated Exchange for cause.
    (2) An agent or broker may be determined noncompliant if HHS finds 
that the agent or broker violated--
    (i) Any standard specified under this section;
    (ii) Any term or condition of its agreement with the Federally-
facilitated Exchange required under paragraph (d) of this section, or 
if the agreement with the Federally-facilitated Exchange under Sec.  
155.260(b) is terminated;
    (iii) Any State law applicable to agents or brokers, as required 
under paragraph (e) of this section, including but not limited to State 
laws related to confidentiality and conflicts of interest; or
    (iv) Any Federal law applicable to agents or brokers.
    (3) HHS will notify the agent or broker of the specific finding of 
noncompliance or pattern of noncompliance, and after 30 days from the 
date of the notice, may terminate the agreement for cause if the matter 
is not resolved to the satisfaction of HHS.
    (4) After the period in paragraph (g)(3) of this section has 
elapsed, the agent or broker will no longer be registered with the 
Federally-facilitated Exchange or able to transact information with HHS
    (h) Request for reconsideration of termination for cause from the 
Federally-facilitated Exchange. (1) Request for reconsideration. An 
agent or broker whose agreement with the Federally-facilitated Exchange 
has been terminated may request reconsideration of such action in the 
manner and form established by HHS.
    (2) Timeframe for request. The agent or broker must submit a 
request for reconsideration to the HHS reconsideration entity within 30 
calendar days of the date of the written notice from HHS.
    (3) Notice of reconsideration decision. The HHS reconsideration 
entity will provide the agent or broker with a written notice of the 
reconsideration decision within 30 calendar days of the date it 
receives the request for reconsideration. This decision will constitute 
HHS's final determination.

0
13. Section 155.270 is amended by revising paragraph (a) to read as 
follows:


Sec.  155.270  Use of standards and protocols for electronic 
transactions.

    (a) HIPAA administrative simplification. To the extent that the 
Exchange performs electronic transactions with a covered entity, the 
Exchange must use standards, implementation specifications, operating 
rules, and code sets that are adopted by the Secretary in 45 CFR parts 
160 and 162 or that are otherwise approved by HHS.
* * * * *
0
14. Section 155.280 is added to subpart C to read as follows:

[[Page 54136]]

Sec.  155.280  Oversight and monitoring of privacy and security 
requirements.

    (a) General. HHS will oversee and monitor the Federally-facilitated 
Exchanges and non-Exchange entities required to comply with the privacy 
and security standards established and implemented by a Federally-
facilitated Exchange pursuant to Sec.  155.260 for compliance with 
those standards. HHS will oversee and monitor State Exchanges for 
compliance with the standards State Exchanges establish and implement 
pursuant to Sec.  155.260. State Exchanges will oversee and monitor 
non-Exchange entities required to comply with the privacy and security 
standards established and implemented by a State Exchange pursuant to 
Sec.  155.260.
    (b) Audits and investigations. HHS may conduct oversight activities 
that include but are not limited to the following: audits, 
investigations, inspections, and any reasonable activities necessary 
for appropriate oversight of compliance with the Exchange privacy and 
security standards. HHS may also pursue civil, criminal or 
administrative proceedings or actions as determined necessary.

0
15. Section 155.310 is amended by adding paragraph (k) to read as 
follows:


Sec.  155.310  Eligibility process.

* * * * *
    (k) Incomplete application. If an application filer submits an 
application that does not include sufficient information for the 
Exchange to conduct an eligibility determination for enrollment in a 
QHP through the Exchange or for insurance affordability programs, if 
applicable, the Exchange must--
    (1) Provide notice to the applicant indicating that information 
necessary to complete an eligibility determination is missing, 
specifying the missing information, and providing instructions on how 
to provide the missing information; and
    (2) Provide the applicant with a period of no less than 10 days and 
no more than 90 days from the date on which the notice described in 
paragraph (k)(1) of this section is sent to the applicant to provide 
the information needed to complete the application to the Exchange.
    (3) During the period described in paragraph (k)(2) of this 
section, the Exchange must not proceed with an applicant's eligibility 
determination or provide advance payments of the premium tax credit or 
cost-sharing reductions, unless an application filer has provided 
sufficient information to determine his or her eligibility for 
enrollment in a QHP through the Exchange, in which case the Exchange 
must make such a determination for enrollment in a QHP.

0
16. Section 155.320 is amended by revising the section heading and 
paragraph (b) to read as follows:


Sec.  155.320  Verification of eligibility for minimum essential 
coverage other than through an eligible employer-sponsored plan.

* * * * *
    (b) Verification of eligibility for minimum essential coverage 
other than through an eligible employer-sponsored plan. (1)(i) The 
Exchange must verify whether an applicant is eligible for minimum 
essential coverage other than through an eligible employer-sponsored 
plan, Medicaid, CHIP, or the BHP, using information obtained by 
transmitting identifying information specified by HHS to HHS for 
verification purposes.
    (ii) The Exchange must verify whether an applicant has already been 
determined eligible for coverage through Medicaid, CHIP, or the BHP, if 
a BHP is operating in the service area of the Exchange, within the 
State or States in which the Exchange operates using information 
obtained from the agencies administering such programs.
    (2) Consistent with Sec.  164.512(k)(6)(i) of this subchapter, the 
disclosure to HHS of information regarding eligibility for and 
enrollment in a health plan, which may be considered protected health 
information, as that term is defined in Sec.  160.103 of this 
subchapter, is expressly authorized, for the purposes of verification 
of applicant eligibility for minimum essential coverage as part of the 
eligibility determination process for advance payments of the premium 
tax credit or cost-sharing reductions.
* * * * *

0
17. Section 155.345 is amended by revising paragraphs (i) and (j) to 
read as follows:


Sec.  155.345  Coordination with Medicaid, CHIP, the Basic Health 
Program, and the Pre-existing Condition Insurance Plan.

* * * * *
    (i) Standards for sharing information between the Exchange and the 
agencies administering Medicaid, CHIP, and the BHP. (1) The Exchange 
must utilize a secure electronic interface to exchange data with the 
agencies administering Medicaid, CHIP, and the BHP, if a BHP is 
operating in the service area of the Exchange, including to verify 
whether an applicant for insurance affordability programs has been 
determined eligible for Medicaid, CHIP, or the BHP, as specified in 
Sec.  155.320(b)(1)(ii), and for other functions required under this 
subpart.
    (2) Model agreements. The Exchange may utilize any model agreements 
as established by HHS for the purpose of sharing data as described in 
this section.
    (j) Transition from the Pre-existing Condition Insurance Plan 
(PCIP). The Exchange must follow procedures established in accordance 
with 45 CFR 152.45 to transition PCIP enrollees to the Exchange to 
ensure that there are no lapses in health coverage.

0
18. Section 155.415 is added to read as follows:


Sec.  155.415  Allowing issuer application assisters to assist with 
eligibility applications.

    (a) Exchange option. An Exchange, to the extent permitted by State 
law, may permit issuer application assisters, as defined at Sec.  
155.20, to assist individuals in the individual market with applying 
for a determination or redetermination of eligibility for coverage 
through the Exchange and insurance affordability programs, provided 
that such issuer application assisters meet the requirements set forth 
in Sec.  156.1230(a)(2) of this subchapter.
    (b) [Reserved]

0
19. Add Subpart F to read as follows:
Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
Sec.
155.500 Definitions.
155.505 General eligibility appeals requirements.
155.510 Appeals coordination.
155.515 Notice of appeal procedures.
155.520 Appeal requests.
155.525 Eligibility pending appeal.
155.530 Dismissals.
155.535 Informal resolution and hearing requirements.
155.540 Expedited appeals.
155.545 Appeal decisions.
155.550 Appeal record.
155.555 Employer appeals process.

Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs


Sec.  155.500  Definitions.

    In addition to those definitions in Sec. Sec.  155.20 and 155.300, 
for purposes of this subpart and Sec.  155.740 of subpart H, the 
following terms have the following meanings:
    Appeal record means the appeal decision, all papers and requests 
filed in the proceeding, and, if a hearing was held, the transcript or 
recording of hearing testimony or an official report containing the 
substance of what happened at the hearing, and any exhibits introduced 
at the hearing.

[[Page 54137]]

    Appeal request means a clear expression, either orally or in 
writing, by an applicant, enrollee, employer, or small business 
employer or employee to have any eligibility determination or 
redetermination contained in a notice issued in accordance with 
Sec. Sec.  155.310(g), 155.330(e)(1)(ii), 155.335(h)(1)(ii), 
155.610(i), or 155.715(e) or (f), reviewed by an appeals entity.
    Appeals entity means a body designated to hear appeals of 
eligibility determinations or redeterminations contained in notices 
issued in accordance with Sec. Sec.  155.310(g), 155.330(e)(1)(ii), 
155.335(h)(1)(ii), 155.610(i), or 155.715(e) and (f).
    Appellant means the applicant or enrollee, the employer, or the 
small business employer or employee who is requesting an appeal.
    De novo review means a review of an appeal without deference to 
prior decisions in the case.
    Evidentiary hearing means a hearing conducted where evidence may be 
presented.
    Vacate means to set aside a previous action.


Sec.  155.505  General eligibility appeals requirements.

    (a) General requirements. Unless otherwise specified, the 
provisions of this subpart apply to Exchange eligibility appeals 
processes, regardless of whether the appeals process is provided by a 
State Exchange appeals entity or by the HHS appeals entity.
    (b) Right to appeal. An applicant or enrollee must have the right 
to appeal--
    (1) An eligibility determination made in accordance with subpart D, 
including--
    (i) An initial determination of eligibility, including the amount 
of advance payments of the premium tax credit and level of cost-sharing 
reductions, made in accordance with the standards specified in Sec.  
155.305(a) through (h); and
    (ii) A redetermination of eligibility, including the amount of 
advance payments of the premium tax credit and level of cost-sharing 
reductions, made in accordance with Sec. Sec.  155.330 and 155.335;
    (2) An eligibility determination for an exemption made in 
accordance Sec.  155.605;
    (3) A failure by the Exchange to provide timely notice of an 
eligibility determination in accordance with Sec. Sec.  155.310(g), 
155.330(e)(1)(ii), 155.335(h)(1)(ii), or 155.610(i); and
    (4) A denial of a request to vacate dismissal made by a State 
Exchange appeals entity in accordance with Sec.  155.530(d)(2), made 
pursuant to paragraph (c)(2)(i) or this section; and
    (c) Options for Exchange appeals. Exchange eligibility appeals may 
be conducted by--
    (1) A State Exchange appeals entity, or an eligible entity 
described in paragraph (d) of this section that is designated by the 
Exchange, if the Exchange establishes an appeals process in accordance 
with the requirements of this subpart; or
    (2) The HHS appeals entity--
    (i) Upon exhaustion of the State Exchange appeals process;
    (ii) If the Exchange has not established an appeals process in 
accordance with the requirements of this subpart; or
    (iii) If the Exchange has delegated appeals of exemption 
determinations made by HHS pursuant to Sec.  155.625(b) to the HHS 
appeals entity, and the appeal is limited to a determination of 
eligibility for an exemption.
    (d) Eligible entities. An appeals process established under this 
subpart must comply with Sec.  155.110(a).
    (e) Representatives. An appellant may represent himself or herself, 
or be represented by an authorized representative under Sec.  155.227, 
or by legal counsel, a relative, a friend, or another spokesperson, 
during the appeal.
    (f) Accessibility requirements. Appeals processes established under 
this subpart must comply with the accessibility requirements in Sec.  
155.205(c).
    (g) Judicial review. An appellant may seek judicial review to the 
extent it is available by law.


Sec.  155.510  Appeals coordination.

    (a) Agreements. The appeals entity or the Exchange must enter into 
agreements with the agencies administering insurance affordability 
programs regarding the appeals processes for such programs as are 
necessary to fulfill the requirements of this subpart. Such agreements 
must include a clear delineation of the responsibilities of each entity 
to support the eligibility appeals process, and must--
    (1) Minimize burden on appellants, including not asking the 
appellant to provide duplicative information or documentation that he 
or she already provided to an agency administering an insurance 
affordability program or eligibility appeals process;
    (2) Ensure prompt issuance of appeal decisions consistent with 
timeliness standards established under this subpart; and
    (3) Comply with the requirements set forth in--
    (i) 42 CFR 431.10(d), if the state Medicaid agency delegates 
authority to hear fair hearings under 42 CFR 431.10(c)(ii) to the 
Exchange appeals entity; or
    (ii) 42 CFR 457.348(b), if the state CHIP agency delegates 
authority to review appeals under Sec.  457.1120 to the Exchange 
appeals entity.
    (b) Coordination for Medicaid and CHIP appeals. (1) Where the 
Medicaid or CHIP agency has delegated appeals authority to the Exchange 
appeals entity consistent with 42 CFR 431.10(c)(1)(ii) or 457.1120, and 
the Exchange appeals entity has accepted such delegation--
    (i) The Exchange appeals entity will conduct the appeal in 
accordance with--
    (A) Medicaid and CHIP MAGI-based income standards and standards for 
citizenship and immigration status, in accordance with the eligibility 
and verification rules and procedures, consistent with 42 CFR parts 435 
and 457.
    (B) Notice standards identified in this subpart, subpart D, and by 
the State Medicaid or CHIP agency, consistent with applicable law.
    (ii) Consistent with 42 CFR 431.10(c)(1)(ii), an appellant who has 
been determined ineligible for Medicaid must be informed of the option 
to opt into pursuing his or her appeal of the adverse Medicaid 
eligibility determination with the Medicaid agency, and if the 
appellant elects to do so, the appeals entity transmits the eligibility 
determination and all information provided via secure electronic 
interface, promptly and without undue delay, to the Medicaid agency.
    (2) Where the Medicaid or CHIP agency has not delegated appeals 
authority to the appeals entity and the appellant seeks review of a 
denial of Medicaid or CHIP eligibility, the appeals entity must 
transmit the eligibility determination and all relevant information 
provided as part of the initial application or appeal, if applicable, 
via secure electronic interface, promptly and without undue delay, to 
the Medicaid or CHIP agency, as applicable.
    (3) The Exchange must consider an appellant determined or assessed 
by the appeals entity as not potentially eligible for Medicaid or CHIP 
as ineligible for Medicaid and CHIP based on the applicable Medicaid 
and CHIP MAGI-based income standards for purposes of determining 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions.
    (c) Data exchange. The appeals entity must--
    (1) Ensure that all data exchanges that are part of the appeals 
process, comply

[[Page 54138]]

with the data exchange requirements in Sec. Sec.  155.260, 155.270, and 
155.345(i); and
    (2) Comply with all data sharing requests made by HHS.


Sec.  155.515  Notice of appeal procedures.

    (a) Requirement to provide notice of appeal procedures. The 
Exchange must provide notice of appeal procedures at the time that 
the--
    (1) Applicant submits an application; and
    (2) Notice of eligibility determination is sent under Sec. Sec.  
155.310(g), 155.330(e)(1)(ii), 155.335(h)(1)(ii), and 155.610(i).
    (b) General content on right to appeal and appeal procedures. 
Notices described in paragraph (a) of this section must contain--
    (1) An explanation of the applicant or enrollee's appeal rights 
under this subpart;
    (2) A description of the procedures by which the applicant or 
enrollee may request an appeal;
    (3) Information on the applicant or enrollee's right to represent 
himself or herself, or to be represented by legal counsel or another 
representative;
    (4) An explanation of the circumstances under which the appellant's 
eligibility may be maintained or reinstated pending an appeal decision, 
as described in Sec.  155.525; and
    (5) An explanation that an appeal decision for one household member 
may result in a change in eligibility for other household members and 
that such a change will be handled as a redetermination of eligibility 
for all household members in accordance with the standards specified in 
Sec.  155.305.


Sec.  155.520  Appeal requests.

    (a) General standards for appeal requests. The Exchange and the 
appeals entity--
    (1) Must accept appeal requests submitted--
    (i) By telephone;
    (ii) By mail;
    (iii) In person, if the Exchange or the appeals entity, as 
applicable, is capable of receiving in-person appeal requests; and
    (iv) Via the Internet.
    (2) Must assist the applicant or enrollee in making the appeal 
request, if requested;
    (3) Must not limit or interfere with the applicant or enrollee's 
right to make an appeal request; and
    (4) Must consider an appeal request to be valid for the purpose of 
this subpart, if it is submitted in accordance with the requirements of 
paragraphs (b) and (c) of this section and Sec.  155.505(b).
    (b) Appeal request. The Exchange and the appeals entity must allow 
an applicant or enrollee to request an appeal within--
    (1) 90 days of the date of the notice of eligibility determination; 
or
    (2) A timeframe consistent with the state Medicaid agency's 
requirement for submitting fair hearing requests, provided that 
timeframe is no less than 30 days, measured from the date of the notice 
of eligibility determination.
    (c) Appeal of a State Exchange appeals entity decision to HHS. If 
the appellant disagrees with the appeal decision of a State Exchange 
appeals entity, he or she may make an appeal request to the HHS appeals 
entity within 30 days of the date of the State Exchange appeals 
entity's notice of appeal decision or notice of denial of a request to 
vacate a dismissal.
    (d) Acknowledgement of appeal request. (1) Upon receipt of a valid 
appeal request pursuant to paragraph (b), (c), or (d)(3)(i) of this 
section, the appeals entity must--
    (i) Send timely acknowledgment to the appellant of the receipt of 
his or her valid appeal request, including--
    (A) Information regarding the appellant's eligibility pending 
appeal pursuant to Sec.  155.525; and
    (B) An explanation that any advance payments of the premium tax 
credit paid on behalf of the tax filer pending appeal are subject to 
reconciliation under 26 CFR 1.36B-4.
    (ii) Send timely notice via secure electronic interface of the 
appeal request and, if applicable, instructions to provide eligibility 
pending appeal pursuant to Sec.  155.525, to the Exchange and to the 
agencies administering Medicaid or CHIP, where applicable.
    (iii) If the appeal request is made pursuant to paragraph (c) of 
this section, send timely notice via secure electronic interface of the 
appeal request to the State Exchange appeals entity.
    (iv) Promptly confirm receipt of the records transferred pursuant 
to paragraph (d)(3) or (4) of this section to the Exchange or the State 
Exchange appeals entity, as applicable.
    (2) Upon receipt of an appeal request that is not valid because it 
fails to meet the requirements of this section or Sec.  155.505(b), the 
appeals entity must--
    (i) Promptly and without undue delay, send written notice to the 
applicant or enrollee informing the appellant:
    (A) That the appeal request has not been accepted;
    (B) About the nature of the defect in the appeal request; and
    (C) That the applicant or enrollee may cure the defect and resubmit 
the appeal request by the date determined under paragraph (b) or (c) of 
this section, as applicable, or within a reasonable timeframe 
established by the appeals entity.
    (ii) Treat as valid an amended appeal request that meets the 
requirements of this section and Sec.  155.505(b).
    (3) Upon receipt of a valid appeal request pursuant to paragraph 
(b) of this section, or upon receipt of the notice under paragraph 
(d)(1)(ii) of this section, the Exchange must transmit via secure 
electronic interface to the appeals entity--
    (i) The appeal request, if the appeal request was initially made to 
the Exchange; and
    (ii) The appellant's eligibility record.
    (4) Upon receipt of the notice pursuant to paragraph (d)(1)(iii) of 
this section, the State Exchange appeals entity must transmit via 
secure electronic interface the appellant's appeal record, including 
the appellant's eligibility record as received from the Exchange, to 
the HHS appeals entity.


Sec.  155.525  Eligibility pending appeal.

    (a) General standards. After receipt of a valid appeal request or 
notice under Sec.  155.520(d)(1)(ii) that concerns an appeal of a 
redetermination under Sec.  155.330(e) or Sec.  155.335(h), the 
Exchange or the Medicaid or CHIP agency, as applicable, must continue 
to consider the appellant eligible while the appeal is pending in 
accordance with standards set forth in paragraph (b) of this section or 
as determined by the Medicaid or CHIP agency consistent with 42 CFR 
parts 435 and 457, as applicable.
    (b) Implementation. If the tax filer or appellant, as applicable, 
accepts eligibility pending an appeal, the Exchange must continue the 
appellant's eligibility for enrollment in a QHP, advance payments of 
the premium tax credit, and cost-sharing reductions, as applicable, in 
accordance with the level of eligibility immediately before the 
redetermination being appealed.


Sec.  155.530  Dismissals.

    (a) Dismissal of appeal. The appeals entity must dismiss an appeal 
if the appellant--
    (1) Withdraws the appeal request in writing;
    (2) Fails to appear at a scheduled hearing without good cause;
    (3) Fails to submit a valid appeal request as specified in Sec.  
155.520(a)(4); or
    (4) Dies while the appeal is pending.
    (b) Notice of dismissal to the appellant. If an appeal is dismissed 
under paragraph (a) of this section, the

[[Page 54139]]

appeals entity must provide timely written notice to the appellant, 
including--
    (1) The reason for dismissal;
    (2) An explanation of the dismissal's effect on the appellant's 
eligibility; and
    (3) An explanation of how the appellant may show good cause why the 
dismissal should be vacated in accordance with paragraph (d) of this 
section.
    (c) Notice of the dismissal to the Exchange, Medicaid, and CHIP. If 
an appeal is dismissed under paragraph (a) of this section, the appeals 
entity must provide timely notice to the Exchange, and to the agency 
administering Medicaid or CHIP, as applicable, including instruction 
regarding--
    (1) The eligibility determination to implement; and
    (2) Discontinuing eligibility provided under Sec.  155.525, if 
applicable.
    (d) Vacating a dismissal. The appeals entity must--
    (1) Vacate a dismissal and proceed with the appeal if the appellant 
makes a written request within 30 days of the date of the notice of 
dismissal showing good cause why the dismissal should be vacated; and
    (2) Provide timely written notice of the denial of a request to 
vacate a dismissal to the appellant, if the request is denied.


Sec.  155.535  Informal resolution and hearing requirements.

    (a) Informal resolution. The HHS appeals process will provide an 
opportunity for informal resolution and a hearing in accordance with 
the requirements of this section. A State Exchange appeals entity may 
also provide an informal resolution process prior to a hearing, 
provided that--
    (1) The process complies with the scope of review specified in 
paragraph (e) of this section;
    (2) The appellant's right to a hearing is preserved in any case in 
which the appellant remains dissatisfied with the outcome of the 
informal resolution process;
    (3) If the appeal advances to hearing, the appellant is not asked 
to provide duplicative information or documentation that he or she 
previously provided during the application or informal resolution 
process; and
    (4) If the appeal does not advance to hearing, the informal 
resolution decision is final and binding.
    (b) Notice of hearing. When a hearing is scheduled, the appeals 
entity must send written notice to the appellant of the date, time, and 
location or format of the hearing no later than 15 days prior to the 
hearing date.
    (c) Conducting the hearing. All hearings under this subpart must be 
conducted--
    (1) At a reasonable date, time, and location or format;
    (2) After notice of the hearing, pursuant to paragraph (b) of this 
section;
    (3) As an evidentiary hearing, consistent with paragraph (e) of 
this section; and
    (4) By one or more impartial officials who have not been directly 
involved in the eligibility determination or any prior Exchange appeal 
decisions in the same matter.
    (d) Procedural rights of an appellant. The appeals entity must 
provide the appellant with the opportunity to--
    (1) Review his or her appeal record, including all documents and 
records to be used by the appeals entity at the hearing, at a 
reasonable time before the date of the hearing as well as during the 
hearing;
    (2) Bring witnesses to testify;
    (3) Establish all relevant facts and circumstances;
    (4) Present an argument without undue interference; and
    (5) Question or refute any testimony or evidence, including the 
opportunity to confront and cross-examine adverse witnesses.
    (e) Information and evidence to be considered. The appeals entity 
must consider the information used to determine the appellant's 
eligibility as well as any additional relevant evidence presented 
during the course of the appeals process, including at the hearing.
    (f) Standard of review. The appeals entity will review the appeal 
de novo and will consider all relevant facts and evidence adduced 
during the appeals process.


Sec.  155.540  Expedited appeals.

    (a) Expedited appeals. The appeals entity must establish and 
maintain an expedited appeals process for an appellant to request an 
expedited process where there is an immediate need for health services 
because a standard appeal could jeopardize the appellant's life, 
health, or ability to attain, maintain, or regain maximum function.
    (b) Denial of a request for expedited appeal. If the appeals entity 
denies a request for an expedited appeal, it must--
    (1) Handle the appeal request under the standard process and issue 
the appeal decision in accordance with Sec.  155.545(b)(1); and
    (2) Inform the appellant, promptly and without undue delay, through 
electronic or oral notification, if possible, of the denial and, if 
notification is oral, follow up with the appellant by written notice, 
within the timeframe established by the Secretary. Written notice of 
the denial must include--
    (i) The reason for the denial;
    (ii) An explanation that the appeal request will be transferred to 
the standard process; and
    (iii) An explanation of the appellant's rights under the standard 
process.


Sec.  155.545  Appeal decisions.

    (a) Appeal decisions. Appeal decisions must--
    (1) Be based exclusively on the information and evidence specified 
in Sec.  155.535(e) and the eligibility requirements under subpart D or 
G of this part, as applicable, and if the Medicaid or CHIP agencies 
delegate authority to conduct the Medicaid fair hearing or CHIP review 
to the appeals entity in accordance with 42 CFR 431.10(c)(1)(ii) or 
457.1120, the eligibility requirements under 42 CFR parts 435 and 457, 
as applicable;
    (2) State the decision, including a plain language description of 
the effect of the decision on the appellant's eligibility;
    (3) Summarize the facts relevant to the appeal;
    (4) Identify the legal basis, including the regulations that 
support the decision;
    (5) State the effective date of the decision; and
    (6) If the appeals entity is a State Exchange appeals entity--
    (i) Provide an explanation of the appellant's right to pursue the 
appeal before the HHS appeals entity, including the applicable 
timeframe, if the appellant remains dissatisfied with the eligibility 
determination; and
    (ii) Indicate that the decision of the State Exchange appeals 
entity is final, unless the appellant pursues the appeal before the HHS 
appeals entity.
    (b) Notice of appeal decision. The appeals entity--
    (1) Must issue written notice of the appeal decision to the 
appellant within 90 days of the date of an appeal request under Sec.  
155.520(b) or (c) is received, as administratively feasible.
    (2) In the case of an appeal request submitted under Sec.  155.540 
that the appeals entity determines meets the criteria for an expedited 
appeal, must issue the notice as expeditiously as reasonably possible, 
consistent with the timeframe established by the Secretary.
    (3) Must provide notice of the appeal decision and instructions to 
cease pended eligibility to the appellant, if applicable, via secure 
electronic

[[Page 54140]]

interface, to the Exchange or the Medicaid or CHIP agency, as 
applicable.
    (c) Implementation of appeal decisions. The Exchange, upon 
receiving the notice described in paragraph (b), must promptly--
    (1) Implement the appeal decision effective--
    (i) Prospectively, on the first day of the month following the date 
of the notice of appeal decision, or consistent with Sec.  
155.330(f)(2) or (3), if applicable; or
    (ii) Retroactively, to the date the incorrect eligibility 
determination was made, at the option of the appellant.
    (2) Redetermine the eligibility of household members who have not 
appealed their own eligibility determinations but whose eligibility may 
be affected by the appeal decision, in accordance with the standards 
specified in Sec.  155.305.


Sec.  155.550  Appeal record.

    (a) Appellant access to the appeal record. Subject to the 
requirements of all applicable Federal and State laws regarding 
privacy, confidentiality, disclosure, and personally identifiable 
information, the appeals entity must make the appeal record accessible 
to the appellant at a convenient place and time.
    (b) Public access to the appeal decision. The appeals entity must 
provide public access to all appeal decisions, subject to all 
applicable Federal and State laws regarding privacy, confidentiality, 
disclosure, and personally identifiable information.


Sec.  155.555  Employer appeals process.

    (a) General requirements. The provisions of this section apply to 
employer appeals processes through which an employer may, in response 
to a notice under Sec.  155.310(h), appeal 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.
    (b) Exchange employer appeals process. An Exchange may establish an 
employer appeals process in accordance with the requirements of this 
section, Sec.  155.505(f) through (g), and Sec.  155.510(a)(1), (a)(2), 
and (c). Where an Exchange has not established an employer appeals 
process, HHS will provide an employer appeals process that meets the 
requirements of this section, Sec. Sec.  155.505(f) through (g), and 
155.510(a)(1), (a)(2), and (c).
    (c) Appeal request. The Exchange and appeals entity, as applicable, 
must--
    (1) Allow an employer to request an appeal within 90 days from the 
date the notice described under Sec.  155.310(h) is sent;
    (2) Allow an employer to submit relevant evidence to support the 
appeal;
    (3) Allow an employer to submit an appeal request to--
    (i) The Exchange or the Exchange appeals entity, if the Exchange 
establishes an employer appeals process; or
    (ii) The HHS appeals entity, if the Exchange has not established an 
employer appeals process;
    (4) Comply with the requirements of Sec.  155.520(a)(1) through 
(3); and
    (5) Consider an appeal request valid if it is submitted in 
accordance with paragraph (c)(1) of this section and with the purpose 
of appealing the determination identified in the notice specified in 
Sec.  155.310(h).
    (d) Notice of appeal request. Upon receipt of a valid appeal 
request, the appeals entity must--
    (1) Send timely acknowledgement of the receipt of the appeal 
request to the employer, including an explanation of the appeals 
process;
    (2) Send timely notice to the employee of the receipt of the appeal 
request, including--
    (i) An explanation of the appeals process;
    (ii) Instructions for submitting additional evidence for 
consideration by the appeals entity; and
    (iii) An explanation of the potential effect of the employer's 
appeal on the employee's eligibility.
    (3) Promptly notify the Exchange of the appeal, if the employer did 
not initially make the appeal request to the Exchange.
    (4) Promptly and without undue delay send written notice to the 
employer of an appeal request that is not valid because it fails to 
meet the requirements of this section. The written notice must inform 
the employer--
    (i) That the appeal request has not been accepted;
    (ii) About the nature of the defect in the appeal request; and
    (iii) That the employer may cure the defect and resubmit the appeal 
request by the date determined under paragraph (c) of this section, or 
within a reasonable timeframe established by the appeals entity.
    (iv) Treat as valid an amended appeal request that meets the 
requirements of this section, including standards for timeliness.
    (e) Transmittal and receipt of records. (1) Upon receipt of a valid 
appeal request under this section, or upon receipt of the notice under 
paragraph (d)(3) of this section, the Exchange must promptly transmit 
via secure electronic interface to the appeals entity--
    (i) The appeal request, if the appeal request was initially made to 
the Exchange; and
    (ii) The employee's eligibility record.
    (2) The appeals entity must promptly confirm receipt of records 
transmitted pursuant to paragraph (e)(1) of this section to the entity 
that transmitted the records.
    (f) Dismissal of appeal. The appeals entity--
    (1) Must dismiss an appeal under the circumstances specified in 
Sec.  155.530(a)(1) or if the request fails to comply with the 
standards in paragraph (c)(4) of this section.
    (2) Must provide timely notice of the dismissal to the employer, 
employee, and Exchange including the reason for dismissal; and
    (3) May vacate a dismissal if the employer makes a written request 
within 30 days of the date of the notice of dismissal showing good 
cause as to why the dismissal should be vacated.
    (g) Procedural rights of the employer. The appeals entity must 
provide the employer the opportunity to--
    (1) Provide relevant evidence for review of the determination of an 
employee's eligibility for advance payments of the premium tax credit 
or cost-sharing reductions;
    (2) Review--
    (i) The information described in Sec.  155.310(h)(1);
    (ii) Information regarding whether the employee's income is above 
or below the threshold by which the affordability of employer-sponsored 
minimum essential coverage is measured, as set forth by standards 
described in 26 CFR 1.36B; and
    (iii) Other data used to make the determination described in Sec.  
155.305(f) or (g), to the extent allowable by law, except the 
information described in paragraph (h) of this section.
    (h) Confidentiality of employee information. Neither the Exchange 
nor the appeals entity may make available to an employer any tax return 
information of an employee as prohibited by section 6103 of the Code.
    (i) Adjudication of employer appeals. Employer appeals must--
    (1) Be reviewed by one or more impartial officials who have not 
been directly involved in the employee eligibility determination 
implicated in the appeal;
    (2) Consider the information used to determine the employee's 
eligibility as well as any additional relevant evidence provided by the 
employer or the employee during the course of the appeal; and

[[Page 54141]]

    (3) Be reviewed de novo.
    (j) Appeal decisions. Employer appeal decisions must--
    (1) Be based exclusively on the information and evidence described 
in paragraph (i)(2) of this section and the eligibility standards in 45 
CFR part 155, subpart D;
    (2) State the decision, including a plain language description of 
the effect of the decision on the employee's eligibility; and
    (3) Comply with the requirements set forth in Sec.  155.545(a)(3) 
through (5).
    (k) Notice of appeal decision. The appeals entity must provide 
written notice of the appeal decision within 90 days of the date the 
appeal request is received, as administratively feasible, to--
    (1) The employer. Such notice must include--
    (i) The appeal decision; and
    (ii) An explanation that the appeal decision does not foreclose any 
appeal rights the employer may have under subtitle F of the Code.
    (2) The employee. Such notice must include--
    (i) The appeal decision; and
    (ii) An explanation that the employee and his or her household 
members, if applicable, may appeal a redetermination of eligibility 
that occurs as a result of the appeal decision.
    (3) The Exchange.
    (l) Implementation of the appeal decision. After receipt of the 
notice under paragraph (k)(3) of this section, if the appeal decision 
affects the employee's eligibility, the Exchange must promptly 
redetermine the employee's eligibility and the eligibility of the 
employee's household members, if applicable, in accordance with the 
standards specified in Sec.  155.305.
    (m) Appeal record. Subject to the requirements of Sec.  155.550 and 
paragraph (h) of this section, the appeal record must be accessible to 
the employer and to the employee in a convenient format and at a 
convenient time.

0
14. In Sec.  155.700, paragraph (b) is amended by adding the definition 
of ``SHOP application filer'' in alphabetical order to read as follows:


Sec.  155.700  Standards for the establishment of a SHOP.

* * * * *
    (b) * * *
    SHOP application filer means an applicant, an authorized 
representative, an agent or broker of the employer, or an employer 
filing for its employees where not prohibited by other law.

0
15. Section 155.705 is amended by adding paragraphs (c) and (d) to read 
as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (c) Coordination with individual market Exchange for eligibility 
determinations. A SHOP must provide data related to eligibility and 
enrollment of a qualified employee to the individual market Exchange 
that corresponds to the service area of the SHOP, unless the SHOP is 
operated pursuant to Sec.  155.100(a)(2).
    (d) Duties of Navigators in the SHOP. In States that have elected 
to operate only a SHOP pursuant to Sec.  155.100(a)(2), at State option 
and if State law permits the Navigator duties described in Sec.  
155.210(e)(3) and (4) may be fulfilled through referrals to agents and 
brokers.

0
16. Section 155.730 is amended by revising paragraph (f) to read as 
follows:


Sec.  155.730  Application standards for SHOP.

* * * * *
    (f) Filing. The SHOP must:
    (1) Accept applications from SHOP application filers; and
    (2) Provide the tools to file an application via an Internet Web 
site.
* * * * *

0
17. Section 155.735 is added to subpart H to read as follows:


Sec.  155.735  Termination of coverage.

    (a) General requirements. The SHOP must determine the timing, form, 
and manner in which coverage in a QHP may be terminated.
    (b) Termination of employer group health coverage at the request of 
the employer. (1) The SHOP must establish policies for advance notice 
of termination required from the employer and effective dates of 
termination.
    (2) In the FF-SHOP, an employer may terminate coverage for all 
enrollees covered by the employer group health plan effective on the 
last day of any month, provided that the employer has given notice to 
the FF-SHOP on or before the 15th day of any month. If notice is given 
after the 15th of the month, the FF-SHOP may terminate the coverage on 
the last day of the following month.
    (c) Termination of employer group health coverage for non-payment 
of premiums. (1) The SHOP must establish policies for termination for 
non-payment of premiums, including but not limited to policies 
regarding due dates for payment of premiums to the SHOP, grace periods, 
employer and employee notices, and reinstatement provisions.
    (2) In an FF-SHOP--
    (i) For a given month of coverage, premium payment is due by the 
first day of the coverage month.
    (ii) If premium payment is not received 31 days from the first of 
the coverage month, the FF-SHOP may terminate the qualified employer 
for lack of payment.
    (iii) If a qualified employer is terminated due to lack of premium 
payment, but within 30 days following its termination the qualified 
employer requests reinstatement, pays all premiums owed including any 
prior premiums owed for coverage during the grace period, and pays the 
premium for the next month's coverage, the FF-SHOP must reinstate the 
qualified employer in its previous coverage.
    (d) Termination of employee or dependent coverage. (1) The SHOP 
must establish consistent policies regarding the process for and 
effective dates of termination of employee or dependent coverage in the 
following circumstances:
    (i) The employee or dependent is no longer eligible for coverage 
under the employer's group health plan;
    (ii) The employee requests that the SHOP terminate the coverage of 
the employee or a dependent of the employee under the employer's group 
health plan;
    (iii) The QHP in which the employee is enrolled terminates or is 
decertified as described in Sec.  155.1080;
    (iv) The enrollee changes from one QHP to another during the 
employer's annual open enrollment period or during a special enrollment 
period in accordance with Sec.  155.725(j); or
    (v) The enrollee's coverage is rescinded in accordance with Sec.  
147.128 of this subtitle.
    (2) In the FF-SHOP, termination is effective on the last day of the 
month in which the FF-SHOP receives notice of an event described in 
paragraph (d)(1) of this section, and notice must have been received by 
the FF-SHOP prior to the proposed date of termination.
    (e) Termination of coverage tracking and approval. The SHOP must 
comply with the standards described in Sec.  155.430(c).
    (f) Applicability date. The provisions of this section apply to 
coverage--
    (1) Beginning on or after January 1, 2015; and
    (2) In any SHOP providing qualified employers with the option 
described in Sec.  155.705(b)(2) or the option described in Sec.  
155.705(b)(4) before January 1, 2015, beginning with the date that 
option is offered.

0
20. Section 155.740 is added to Subpart H to read as follows:

[[Page 54142]]

Sec.  155.740  SHOP employer and employee eligibility appeals 
requirements.

    (a) Definitions. The definitions in Sec. Sec.  155.20, 155.300, and 
155.500 apply to this section.
    (b) General requirements. (1) A State, establishing an Exchange 
that provides for the establishment of a SHOP pursuant to Sec.  155.100 
must provide an eligibility appeals process for the SHOP. Where a State 
has not established an Exchange that provides for the establishment of 
a SHOP pursuant to Sec.  155.100, HHS will provide an eligibility 
appeals process for the SHOP that meets the requirements of this 
section and the requirements in paragraph (b)(2) of this section.
    (2) The appeals entity must conduct appeals in accordance with the 
requirements established in this section, Sec. Sec.  155.505(e) through 
(g), and 155.510(a)(1), (a)(2), and (c).
    (c) Employer right to appeal. An employer may appeal--
    (1) A notice of denial of eligibility under Sec.  155.715(e); or
    (2) A failure of the SHOP to make an eligibility determination in a 
timely manner.
    (d) Employee right to appeal. An employee may appeal--
    (1) A notice of denial of eligibility under Sec.  155.715(f); or
    (2) A failure of the SHOP to make an eligibility determination in a 
timely manner.
    (e) Appeals notice requirement. Notices of the right to appeal a 
denial of eligibility under Sec.  155.715(e) or (f) must be written and 
include--
    (1) The reason for the denial of eligibility, including a citation 
to the applicable regulations; and
    (2) The procedure by which the employer or employee may request an 
appeal of the denial of eligibility.
    (f) Appeal request. The SHOP and appeals entity must--
    (1) Allow an employer or employee to request an appeal within 90 
days from the date of the notice of denial of eligibility to--
    (i) The SHOP or the appeals entity; or
    (ii) HHS, if no State Exchange that provides for establishment of a 
SHOP has been established;
    (2) Accept appeal requests submitted through any of the methods 
described in Sec.  155.520(a)(1);
    (3) Comply with the requirements of Sec.  155.520(a)(2) and (3); 
and
    (4) Consider an appeal request valid if it is submitted in 
accordance with paragraph (f)(1) of this section.
    (g) Notice of appeal request. Upon receipt of a valid appeal 
request, the appeals entity must--
    (1) Send timely acknowledgement to the employer, or employer and 
employee if an employee is appealing, of the receipt of the appeal 
request, including--
    (i) An explanation of the appeals process; and
    (ii) Instructions for submitting additional evidence for 
consideration by the appeals entity.
    (2) Promptly notify the SHOP of the appeal, if the appeal request 
was not initially made to the SHOP.
    (3) Upon receipt of an appeal request that is not valid because it 
fails to meet the requirements of this section, the appeals entity 
must--
    (i) Promptly and without undue delay, send written notice to the 
employer or employee that is appealing that--
    (A) The appeal request has not been accepted,
    (B) The nature of the defect in the appeal request; and
    (C) An explanation that the employer or employee may cure the 
defect and resubmit the appeal request if it meets the timeliness 
requirements of paragraph (f) of this section, or within a reasonable 
timeframe established by the appeals entity.
    (ii) Treat as valid an amended appeal request that meets the 
requirements of this section.
    (h) Transmittal and receipt of records. (1) Upon receipt of a valid 
appeal request under this section, or upon receipt of the notice under 
paragraph (g)(2) of this section, the SHOP must promptly transmit, via 
secure electronic interface, to the appeals entity--
    (i) The appeal request, if the appeal request was initially made to 
the SHOP; and
    (ii) The eligibility record of the employer or employee that is 
appealing.
    (2) The appeals entity must promptly confirm receipt of records 
transmitted pursuant to paragraph (h)(1) of this section to the SHOP 
that transmitted the records.
    (i) Dismissal of appeal. The appeals entity--
    (1) Must dismiss an appeal if the employer or employee that is 
appealing--
    (i) Withdraws the request in writing; or
    (ii) Fails to submit an appeal request meeting the standards 
specified in paragraph (f) of this section.
    (2) Must provide timely notice to the employer or employee that is 
appealing of the dismissal of the appeal request, including the reason 
for dismissal, and must notify the SHOP of the dismissal.
    (3) May vacate a dismissal if the employer or employee makes a 
written request within 30 days of the date of the notice of dismissal 
showing good cause why the dismissal should be vacated.
    (j) Procedural rights of the employer or employee. The appeals 
entity must provide the employer, or the employer and employee if an 
employee is appealing, the opportunity to submit relevant evidence for 
review of the eligibility determination.
    (k) Adjudication of SHOP appeals. SHOP appeals must--
    (1) Comply with the standards set forth in Sec.  155.555(i)(1) and 
(3); and
    (2) Consider the information used to determine the employer or 
employee's eligibility as well as any additional relevant evidence 
submitted during the course of the appeal by the employer or employee.
    (l) Appeal decisions. Appeal decisions must--
    (1) Be based solely on--
    (i) The evidence referenced in paragraph (k)(2) of this section;
    (ii) The eligibility requirements for the SHOP under Sec.  
155.710(b) or (e), as applicable.
    (2) Comply with the standards set forth in Sec.  155.545(a)(2) 
through (5); and
    (3) Be effective retroactive to the date the incorrect eligibility 
determination was made, if the decision finds the employer or employee 
eligible, or effective as of the date of the notice of the appeal 
decision, if eligibility is denied.
    (m) Notice of appeal decision. The appeals entity must issue 
written notice of the appeal decision to the employer, or to the 
employer and employee if an employee is appealing, and to the SHOP 
within 90 days of the date the appeal request is received.
    (n) Implementation of SHOP appeal decisions. The SHOP must promptly 
implement the appeal decision upon receiving the notice under paragraph 
(m) of this section.
    (o) Appeal record. Subject to the requirements of Sec.  155.550, 
the appeal record must be accessible to the employer, or employer and 
employee if an employee is appealing, in a convenient format and at a 
convenient time.

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

0
21. 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, and 1401-1402, 
Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18042).

0
22. Section 156.20 is amended by adding definitions for ``Delegated

[[Page 54143]]

entity'' and ``Downstream entity'' to read as follows:


Sec.  156.20  Definitions.

* * * * *
    Delegated entity means any party, including an agent or broker, 
that enters into an agreement with a QHP issuer to provide 
administrative services or health care services to qualified 
individuals, qualified employers, or qualified employees and their 
dependents.
    Downstream entity means any party, including an agent or broker, 
that enters into an agreement with a delegated entity or with another 
downstream entity for purposes of providing administrative or health 
care services related to the agreement between the delegated entity and 
the QHP issuer. The term ``downstream entity'' is intended to reach the 
entity that directly provides administrative services or health care 
services to qualified individuals, qualified employers, or qualified 
employees and their dependents.
* * * * *

0
23. Section 156.270 is amended by revising paragraph (b) introductory 
text to read as follows:


Sec.  156.270  Termination of coverage for qualified individuals.

* * * * *
    (b) Termination of coverage notice requirement. If a QHP issuer 
terminates an enrollee's coverage in accordance with Sec.  
155.430(b)(2)(i), (ii), or (iii), the QHP issuer must, promptly and 
without undue delay:
* * * * *

0
24. Section 156.285 is amended by revising paragraphs (d)(1)(i) and 
(iii) to read as follows:


Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (d) * * *
    (1)* * *
    (i)(A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of coverage established in 
Sec.  155.735 of this subchapter, if applicable to the coverage being 
terminated; otherwise
    (B) General requirements regarding termination of coverage 
established in Sec.  156.270(a) of this subchapter.
* * * * *
    (iii)(A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of coverage effective dates as 
set forth in Sec.  155.735 of this subchapter, if applicable to the 
coverage being terminated; otherwise
    (B) Requirements regarding termination of coverage effective dates 
as set forth in Sec.  156.270(i).
* * * * *

0
25. Subpart D is added to read follows:

Subpart D--Federally-Facilitated Exchange Qualified Health Plan 
Issuer Standards


Sec.  156.340  Standards for downstream and delegated entities.

    (a) General requirement. Effective October 1, 2013, notwithstanding 
any relationship(s) that a QHP issuer may have with delegated and 
downstream entities, a QHP issuer maintains responsibility for its 
compliance and the compliance of any of its delegated or downstream 
entities, as applicable, with all applicable standards, including--
    (1) Standards of subpart C of part 156 with respect to each of its 
QHPs on an ongoing basis;
    (2) Exchange processes, procedures, and standards in accordance 
with subparts H and K of part 155 and, in the small group market, Sec.  
155.705 of this subchapter;
    (3) Standards of Sec.  155.220 of this subchapter with respect to 
assisting with enrollment in QHPs; and
    (4) Standards of Sec. Sec.  156.705 and 156.715 for maintenance of 
records and compliance reviews for QHP issuers operating in a 
Federally-facilitated Exchange or FF-SHOP.
    (b) Delegation agreement specifications. If any of the QHP issuer's 
activities or obligations, in accordance with paragraph (a) of this 
section, are delegated to other parties, the QHP issuer's agreement 
with any delegated or downstream entity must--
    (1) Specify the delegated activities and reporting 
responsibilities;
    (2) Provide for revocation of the delegated activities and 
reporting standards or specify other remedies in instances where HHS or 
the QHP issuer determines that such parties have not performed 
satisfactorily;
    (3) Specify that the delegated or downstream entity must comply 
with all applicable laws and regulations relating to the standards 
specified under paragraph (a) of this section;
    (4) Specify that the delegated or downstream entity must permit 
access by the Secretary and the OIG or their designees in connection 
with their right to evaluate through audit, inspection, or other means, 
to the delegated or downstream entity's books, contracts, computers, or 
other electronic systems, including medical records and documentation, 
relating to the QHP issuer's obligations in accordance with Federal 
standards under paragraph (a) of this section until 10 years from the 
final date of the agreement period; and
    (5) Contain specifications described in paragraph (b) of this 
section by no later than January 1, 2015, for existing agreements; and 
no later than the effective date of the agreement for agreements that 
are newly entered into as of October 1, 2013.

0
26. Subpart I is added to read as follows:
Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
Sec.
156.800 Available remedies; Scope.
156.805 Bases and process for imposing civil money penalties in 
Federally-facilitated Exchanges.
156.810 Bases and process for decertification of a QHP offered by an 
issuer through a Federally-facilitated Exchange.

Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges


Sec.  156.800  Available remedies; Scope.

    (a) Kinds of sanctions. HHS may impose the following types of 
sanctions on QHP issuers in a Federally-facilitated Exchange that are 
not in compliance with Exchange standards applicable to issuers 
offering QHPs in the Federally-facilitated Exchange:
    (1) Civil money penalties as specified in Sec.  156.805; and
    (2) Decertification of a QHP offered by the non-compliant QHP 
issuer in a Federally-facilitated Exchange as described in Sec.  
156.810.
    (b) Scope. Sanctions under subpart I are applicable only for non-
compliance with QHP issuer participation standards and other standards 
applicable to issuers offering QHPs in a Federally-facilitated 
Exchange.
    (c) Compliance standard. For 2014, sanctions under this subpart 
will not be imposed if the QHP issuer has made good faith efforts to 
comply with applicable requirements.


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

    (a) Grounds for imposing civil money penalties. Civil money 
penalties may be imposed on an issuer in a Federally-facilitated 
Exchange by HHS if, based on credible evidence, HHS has reasonably 
determined that the issuer has engaged in one or more of the following 
actions:
    (1) Misconduct in the Federally-facilitated Exchange or substantial 
non-compliance with the Exchange standards applicable to issuers 
offering QHPs in the Federally-facilitated Exchange under subparts C 
through G of part 153 of this subchapter;

[[Page 54144]]

    (2) Limiting the QHP's enrollees' access to medically necessary 
items and services that are required to be covered as a condition of 
the QHP issuer's ongoing participation in the Federally-facilitated 
Exchange, if the limitation has adversely affected or has a substantial 
likelihood of adversely affecting one or more enrollees in the QHP 
offered by the QHP issuer;
    (3) Imposing on enrollees premiums in excess of the monthly 
beneficiary premiums permitted by Federal standards applicable to QHP 
issuers participating in the Federally-facilitated Exchange;
    (4) Engaging in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment into a QHP 
offered by the issuer (except as permitted by this part) by qualified 
individuals whose medical condition or history indicates the potential 
for a future need for significant medical services or items;
    (5) Intentionally or recklessly misrepresenting or falsifying 
information that it furnishes--
    (i) To HHS; or
    (ii) To an individual or entity upon which HHS relies to make its 
certifications or evaluations of the QHP issuer's ongoing compliance 
with Exchange standards applicable to issuers offering QHPs in the 
Federally-facilitated Exchange;
    (6) Failure to remit user fees assessed under Sec.  156.50(c); or
    (7) Failure to comply with the cost-sharing reductions and advance 
payments of the premium tax credit standards of subpart E of this Part.
    (b) Factors in determining the amount of civil money penalties 
assessed. In determining the amount of civil money penalties, HHS may 
take into account the following:
    (1) The QHP issuer's previous or ongoing record of compliance;
    (2) The level of the violation, as determined in part by--
    (i) The frequency of the violation, taking into consideration 
whether any violation is an isolated occurrence, represents a pattern, 
or is widespread; and
    (ii) The magnitude of financial and other impacts on enrollees and 
qualified individuals; and
    (3) Aggravating or mitigating circumstances, or other such factors 
as justice may require, including complaints about the issuer with 
regard to the issuer's compliance with the medical loss ratio standards 
required by the Affordable Care Act and as codified by applicable 
regulations.
    (c) Maximum penalty. The maximum amount of penalty imposed for each 
violation is $100 for each day for each QHP issuer for each individual 
adversely affected by the QHP issuer's non-compliance; and where the 
number of individuals cannot be determined, HHS may estimate the number 
of individuals adversely affected by the violation.
    (d) Notice of intent to issue civil money penalty. If HHS proposes 
to assess a civil money penalty in accordance with this part, HHS will 
send a written notice of this decision to--
    (1) The QHP issuer against whom the civil money penalty is being 
imposed, whose notice must include the following:
    (i) A description of the basis for the determination;
    (ii) The basis for the penalty;
    (iii) The amount of the penalty;
    (iv) The date the penalty is due;
    (v) An explanation of the issuer's right to a hearing under an 
applicable administrative hearing process; and
    (vi) Information about where to file the request for hearing.
    (2) [Reserved]
    (e) Failure to request a hearing. (1) If the QHP issuer does not 
request a hearing within 30 days of the issuance of the notice 
described in paragraph (d)(1) of this section, HHS may assess the 
proposed civil money penalty.
    (2) HHS will notify the QHP issuer in writing of any penalty that 
has been assessed and of the means by which the responsible entity may 
satisfy the judgment.
    (3) The QHP issuer has no right to appeal a penalty with respect to 
which it has not requested a hearing in accordance with the 
requirements of the applicable administrative hearing process unless 
the QHP issuer can show good cause, as determined under Sec.  
156.905(b), for failing to timely exercise its right to a hearing.


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

    (a) Bases for decertification. A QHP may be decertified on one or 
more of the following grounds:
    (1) The QHP issuer substantially fails to comply with the Federal 
laws and regulations applicable to QHP issuers participating in the 
Federally-facilitated Exchange;
    (2) The QHP issuer substantially fails to comply with the standards 
related to the risk adjustment, reinsurance, or risk corridors programs 
under 45 CFR part 153, including providing HHS with valid risk 
adjustment, reinsurance or risk corridors data;
    (3) The QHP issuer substantially fails to comply with the 
transparency and marketing standards in Sec. Sec.  156.220 and 156.225;
    (4) The QHP issuer substantially fails to comply with the standards 
regarding advance payments of the premium tax credit and cost-sharing 
in subpart E of this part;
    (5) The QHP issuer is operating in the Federally-facilitated 
Exchange in a manner that hinders the efficient and effective 
administration of the Exchange;
    (6) The QHP no longer meets the conditions of the applicable 
certification criteria;
    (7) Based on credible evidence, the QHP issuer has committed or 
participated in fraudulent or abusive activities, including submission 
of false or fraudulent data;
    (8) The QHP issuer substantially fails to meet the requirements 
under Sec.  156.230 related to network adequacy standards or, Sec.  
156.235 related to inclusion of essential community providers;
    (9) The QHP issuer substantially fails to comply with the law and 
regulations related to internal claims and appeals and external review 
processes; or
    (10) The State recommends to HHS that the QHP should no longer be 
available in a Federally-facilitated Exchange.
    (11) The QHP issuer substantially fails to comply with the privacy 
or security standards set forth in Sec.  156.260.
    (b) State sanctions and determinations. (1) State sanctions. HHS 
may consider regulatory or enforcement actions taken by a State against 
a QHP issuer as a factor in determining whether to decertify a QHP 
offered by that issuer.
    (2) State determinations. HHS may decertify a QHP offered by an 
issuer in a Federally-facilitated Exchange based on a determination or 
action by a State as it relates to the issuer offering QHPs in a 
Federally-facilitated Exchange, including when a State places an issuer 
or its parent organization into receivership or when the State 
recommends to HHS that the QHP no longer be available in a Federally-
facilitated Exchange.
    (c) Standard decertification process. For decertification actions 
on grounds other than those described in paragraphs (a)(7), (8), or (9) 
of this section, HHS will provide written notices to the QHP issuer, 
enrollees in that QHP, and the State department of insurance in the 
State in which the QHP is being decertified. The written notice must 
include the following:

[[Page 54145]]

    (1) The effective date of the decertification, which will be a date 
specified by HHS that is no earlier than 30 days after the date of 
issuance of the notice;
    (2) The reason for the decertification, including the regulation or 
regulations that are the basis for the decertification;
    (3) For the written notice to the QHP issuer, information about the 
effect of the decertification on the ability of the issuer to offer the 
QHP in the Federally-facilitated Exchange and must include information 
about the procedure for appealing the decertification by making a 
hearing request; and
    (4) The written notice to the QHP enrollees must include 
information about the effect of the decertification on enrollment in 
the QHP and about the availability of a special enrollment period, as 
described in Sec.  155.420 of this subchapter.
    (d) Expedited decertification process. For decertification actions 
on grounds described in paragraphs (a)(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:
    (1) The effective date of the decertification, which will be a date 
specified by HHS; and
    (2) The information required by paragraphs (c)(2) through (4) of 
this section.
    (e) Appeals. An issuer may appeal the decertification of a QHP 
offered by that issuer under paragraph (c) or (d) of this section by 
filing a request for hearing under an applicable administrative hearing 
process.
    (1) Effect of request for hearing. If an issuer files a request for 
hearing under this paragraph,
    (i) If the decertification is under paragraph (c) of this section, 
the decertification will not take effect prior to the issuance of the 
final administrative decision in the appeal, notwithstanding the 
effective date specified in the notice under paragraph (c)(1) of this 
section.
    (ii) If the decertification is under paragraph (d) of this section, 
the decertification will be effective on the date specified in the 
notice of decertification, but the certification of the QHP may be 
reinstated immediately upon issuance of a final administrative decision 
that the QHP should not be decertified.
    (2) [Reserved]

0
27. Subpart K is added to read as follows:

Subpart K-Cases Forwarded to Qualified Health Plans and Qualified 
Health Plan Issuers in Federally-facilitated Exchanges


Sec.  156.1010  Standards.

    (a) A case is a communication brought by a complainant that 
expresses dissatisfaction with a specific person or entity subject to 
State or Federal laws regulating insurance, concerning the person or 
entity's activities related to the offering of insurance, other than a 
communication with respect to an adverse benefit determination as 
defined in Sec.  147.136(a)(2)(i) of this subchapter. Issues related to 
adverse benefit determinations are not addressed in this section and 
are subject to the provisions in Sec.  147.136 of this subchapter 
governing internal claims appeals and external review. Issues related 
to eligibility determination processes and appeals are not addressed in 
this section and are subject to the provisions in Subpart F of Part 
155.
    (b) QHP issuers operating in a Federally-facilitated Exchange must 
investigate and resolve, as appropriate, cases from the complainant 
forwarded to the issuer by HHS. Cases received by a QHP issuer 
operating in a Federally-facilitated Exchange directly from a 
complainant or the complainant's authorized representative will be 
handled by the issuer through its internal customer service process.
    (c) Cases may be forwarded to a QHP issuer operating in a 
Federally-facilitated Exchange through a casework tracking system 
developed by HHS or other means as determined by HHS.
    (d) Cases received by a QHP issuer operating in a Federally-
facilitated Exchange from HHS must be resolved within 15 calendar days 
of receipt of the case. Urgent cases as defined in paragraph (e) of 
this section that do not otherwise fall within the scope of Sec.  
147.136 of this subchapter must be resolved no later than 72 hours 
after receipt of the case. Where applicable State laws and regulations 
establish timeframes for case resolution that are stricter than the 
standards contained in this paragraph, QHP issuers operating in a 
Federally-facilitated Exchange must comply with such stricter laws and 
regulations.
    (e) For cases received from HHS by a QHP issuer operating in a 
Federally-facilitated Exchange, an urgent case is one in which there is 
an immediate need for health services because the non-urgent standard 
could seriously jeopardize the enrollee's or potential enrollee's life, 
or health or ability to attain, maintain, or regain maximum function; 
or one in which the process for non-urgent cases would jeopardize the 
enrollee's or potential enrollee's ability enroll in a QHP through the 
Federally-facilitated Exchange.
    (f) For cases received from HHS, QHP issuers operating in a 
Federally-facilitated Exchange are required to notify complainants 
regarding the disposition of the as soon as possible upon resolution of 
the case, but in no event later than three (3) business days after the 
case is resolved.
    (1) For the purposes of meeting the requirement in this paragraph 
(f), notification may be by verbal or written means as determined most 
appropriate by the QHP issuer.
    (2) In instances when the initial notification of a case's 
disposition is not written, written notification must be provided to 
the consumer in a timely manner.
    (g) For cases received from HHS, QHP issuers operating in a 
Federally-facilitated Exchange must use the casework tracking system 
developed by HHS, or other means as determined by HHS, to document the 
following:
    (1) The date of resolution of a case received from HHS;
    (2) A resolution summary of the case no later than seven (7) 
business days after resolution of the case. The record must include a 
clear and concise narrative explaining how the case was resolved 
including information about how and when the complainant was notified 
of the resolution; and
    (3) For a case in which a State agency, including but not limited 
to a State department of insurance, conducts an investigation related 
to that case, any compliance issues identified by the State agency 
implicating the QHP or QHP issuer.
    (h) Cases received by a QHP issuer operating in a Federally-
facilitated Exchange from a State in which the issuer offers QHPs must 
be investigated and resolved according to applicable State laws and 
regulations. With respect to cases directly handled by the State, HHS 
or any other appropriate regulatory authority, QHP issuers operating in 
a Federally-facilitated Exchange must cooperate fully with the efforts 
of the State, HHS, or other regulatory authority to resolve the case.

0
28. Subpart M is added to read as follows:
Subpart M--Qualified Health Plan Issuer Responsibilities
Sec.
156.1230 Direct enrollment with the QHP issuer in a manner 
considered to be through the Exchange.
156.1240 Enrollment process for qualified individuals.

[[Page 54146]]

Subpart M--Qualified Health Plan Issuer Responsibilities


Sec.  156.1230  Direct enrollment with the QHP issuer in a manner 
considered to be through the Exchange.

    (a) A QHP issuer that is directly contacted by a potential 
applicant may, at the Exchange's option, enroll such applicant in a QHP 
in a manner that is considered through the Exchange. In order for the 
enrollment to be made directly with the issuer in a manner that is 
considered to be through the Exchange, the QHP issuer needs to comply 
with at least the following requirements:
    (1) QHP issuer general requirements. (i) The QHP issuer follows the 
enrollment process for qualified individuals consistent with Sec.  
156.265.
    (ii) The QHP issuer's Web site provides applicants the ability to 
view QHPs offered by the issuer with the data elements listed in Sec.  
155.205(b)(1)(i) through (viii) of this subchapter.
    (iii) The QHP issuer's Web site clearly distinguishes between QHPs 
for which the consumer is eligible and other non-QHPs that the issuer 
may offer, and indicate that advance payments of the premium tax credit 
and cost sharing reductions apply only to QHPs offered through the 
Exchange.
    (iv) The QHP issuer informs all applicants of the availability of 
other QHP products offered through the Exchange through an HHS-approved 
universal disclaimer and displays the Web link to and describes how to 
access the Exchange Web site.
    (v) The QHP issuer's Web site allows applicants to select and 
attest to an advance payment of the premium tax credit amount, if 
applicable, in accordance with Sec.  155.310(d)(2) of this subchapter.
    (2) QHP issuer application assister eligibility application 
assistance requirements. If permitted by the Exchange pursuant to Sec.  
155.415 of this subchapter, and to the extent permitted by State law, a 
QHP issuer may permit its issuer application assisters, as defined at 
Sec.  155.20, to assist individuals in the individual market with 
applying for a determination or redetermination of eligibility for 
coverage through the Exchange and for insurance affordability programs, 
provided that such issuer ensures that each of its application 
assisters at least-
    (i) Receives training on QHP options and insurance affordability 
programs, eligibility, and benefits rules and regulations;
    (ii) Complies with the Exchange's privacy and security standards 
adopted consistent with Sec.  155.260 of this subchapter; and
    (iii) Complies with applicable State law related to the sale, 
solicitation, and negotiation of health insurance products, including 
applicable State law related to agent, broker, and producer licensure; 
confidentiality; and conflicts of interest.
    (b) Direct enrollment in a Federally-facilitated Exchange. The 
individual market Federally-facilitated Exchanges will permit issuers 
of QHPs in each Federally-facilitated Exchange to directly enroll 
applicants in a manner that is considered to be through the Exchange, 
pursuant to paragraph (a) of this section, to the extent permitted by 
applicable State law.


Sec.  156.1240  Enrollment process for qualified individuals.

    (a) Premium payment. A QHP issuer must--
    (1) Follow the premium payment process established by the Exchange 
in accordance with Sec.  155.240.
    (2) At a minimum, for all payments in the individual market, accept 
paper checks, cashier's checks, money orders, EFT, and all general-
purpose pre-paid debit cards as methods of payment and present all 
payment method options equally for a consumer to select their preferred 
payment method.
    (b) [Reserved]

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: August 13, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 15, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-21338 Filed 8-28-13; 4:15 pm]
BILLING CODE 4120-01-P